INDIA EU FREE TRADE AGREEMENT - A Strategic Leap Forward
Great news for EU-based companies!
India and the European Union have finalised a landmark Free Trade Agreement, often called the “Mother of all Deals.” Expected to be signed this year and effective from early next year, it will reduce tariffs, expand market access, and strengthen EU-India economic ties as Europe diversifies beyond the US and China.
Key features of the India EU Free Trade agreement
- Indian tariffs on 30% of goods imported from the EU will fall to zero immediately.
- Overall, tariffs on 96% of EU goods exports to India will be eliminated or reduced.
- Besides the relaxation of tariffs on car imports from the EU, existing Indian tariffs of up to 44% on machinery, 22% on chemicals and 11% on pharmaceuticals, to be eliminated.
- Tariffs on EU aircraft and spacecraft to be eliminated for almost all products while those on optical, medical and surgical equipment will be eliminated for 90% of products.
- Meanwhile, spirits and wines imported to India from the EU, currently tariffed at 150%, will be cut to 20 to 30% for wines, 40% for spirits and 50% for beer.
- India will also provide improved access for EU firms in financial and maritime services, and both sides will simplify customs rules and provide stronger intellectual property protections.
- This will include privileged access for EU exports to the world’s most populous country of 1.45 billion people, will potentially double EU goods exports to India by 2032
- Protection of EU intellectual property, such as trademarks.
Here’s how the India-EU Free Trade Agreement (FTA) is expected to help European Union (EU) companies set up a base or expand operations in India
1. Lower Duties & Better Market Access
One of the core elements of the FTA is the reduction or elimination of tariffs on a wide range of goods traded between India and the EU. For EU companies, this means:
- Significantly reduced import duties on European products such as machinery, medical equipment, chemicals, and automotive components, making them more price-competitive in India’s large market.
- Improved access to goods and services markets with a clear schedule for tariff cuts – a key factor EU firms consider when planning manufacturing bases overseas.
Why this helps EU companies: Lower duties reduce the cost of exporting to India and production inputs within India, improving profitability and making local manufacturing or distribution hubs more viable.
Details summary of product wise tariff cuts in various sectors
| EU Exports to India – Product Wise Tariff Cuts | Current Tariffs | Future Tariffs under FTA |
|---|---|---|
| Machinery and Electrical Equipment | Up to 44% | 0% for almost all products |
| Aircraft and Spacecraft | Up to 11% | 0% for almost all products |
| Optical, Medical and Surgical Equipment | Up to 27.5% | 0% for 90% of products |
| Plastics | Up to 16.5% | 0% for almost all products |
| Pearls, Precious Stones and Metals | Up to 22.5% | 0% for 20% of products and tariff reduction for another 36% of products |
| Chemicals | Up to 22% | 0% for almost all products |
| Motor Vehicles | 110% | 10% |
| Iron and Steel | Up to 22% | 0% for almost all products |
| Pharmaceuticals | Up to 11% | 0% for almost all products |
Market access for EU Agri-food exports
Indian tariffs on agrifood products are 36% on average and can be as high as 150%. The agreement substantially reduces or eliminates them on EU exports of key agricultural goods.
| Product | Current Tariffs | Future Tariffs |
|---|---|---|
| Wine | 150% | 20% (premium range, 30% (medium range) |
| Spirits | Up to 150% | 40% |
| Beer | 110% | 50% |
| Olive Oil, Margarine & Other Vegetable Oils | Up to 45% | 0% |
| Kiwis and Pears | 33% | 10% |
| Fruit Juices and Non-Alcoholic Beer | Up to 55% | 0% |
| Processed Food (Breads, Pastries, Biscuits, Pasta, Chocolate, Pet Food) | Up to 50% | 0% |
| Sheep Meat | 33% | 0% |
| Sausages and Other Meat Preparations | Up to 110% | 50% |
2. Simplified Regulatory Framework and Transparency
FTA typically include provisions that:
- Reduce non-tariff barriers, like complex documentation and inconsistent regulatory requirements.
- Establish clearer rules and legal certainty for businesses, including predictable customs procedures and simplified compliance requirements.
This improved transparency is critical for EU companies considering foreign direct investment (FDI) and setting up operations in India, as it lowers administrative risk and uncertainty.
3. Services & Investment Opportunities
While the detailed services and investment chapters are still to be fully implemented, the FTA:
- Facilitates easier provision of services (e.g., finance, consulting, IT), which can encourage EU firms to establish service arms or regional offices in India.
- Encourages investment protection and cooperation, giving foreign investors confidence that their capital and intellectual property are safeguarded.
Why this matters: Many EU firms expand abroad initially through service subsidiaries (e.g., legal, financial, tech services) before moving into full manufacturing or regional HQ models.
4. Services & Investment Opportunities
By integrating India more closely with the EU economy:
- EU companies can adopt a “China+1” production strategy – diversifying supply chains by manufacturing or sourcing from India as an alternative to other Asian bases.
- India’s large labor force and competitive costs make it attractive for manufacturing hubs, especially in electronics, automotive components, machinery, and pharmaceuticals.
India becomes not just a market to sell to, but a regional production and export base for EU firms.
5. Services, Skills & Movement
While not as extensive as a full labor mobility agreement, the broader EU-India cooperation framing the FTA aims to:
- Support movement of skilled professionals and students between India and the EU, easing talent deployment for companies operating across both regions.
This helps EU companies that want to establish technical or management teams in India with more predictable mobility routes.
In Summary
The India–EU FTA will help EU companies set up or expand in India by:
- Reducing cost barriers (tariffs and compliance costs)
- Improving regulatory clarity and easing market entry
- Enhancing investment protection and services access
- Supporting SMEs with dedicated guidance points
- Boosting India’s attractiveness as a manufacturing and supply-chain hub
- Facilitating people-to-people and business ties
How JurisHub Can Support You
JurisHub provides end-to-end support for businesses expanding into India, including:
- Advisory Services: Entity structuring aligned with your objectives.
- Company Incorporation: Registration with the Registrar of Companies (ROC).
- Ongoing Compliance: Administration, accounting, payroll, company secretarial, tax, and regulatory compliance.
- Staffing Solutions: Recruitment and HR support for skilled professionals.
Ready to Explore the Indian Market? Let JurisHub Be Your Strategic Partner.
Contact us to discuss how we can support your business expansion in India under the new FTA framework.
Allen D’souza
Manager | Business Development
- +91 8600481900
- adsouza@juristax.com