India-EU Trade Deal to Cut Import Duties on Textiles, Footwear, Cars, Wines and More
India and the European Union are close to finalizing a landmark India-EU Trade deal that will significantly reduce import duties on a range of goods including textiles, footwear, cars, and wines after nearly two decades of negotiations. This agreement is expected to reshape trade relations between India and the 27-member EU bloc while boosting exports, creating jobs, and strengthening economic ties between two of the world’s largest markets.
What Is the India-EU Trade Deal
The India-EU Trade deal is essentially a Free Trade Agreement (FTA) designed to reduce or eliminate import duties on most goods traded between India and the European Union. Negotiations have been ongoing since 2007 and are expected to conclude with an official announcement soon, possibly at the India-EU Summit. The deal aims to make Indian exports more competitive in the EU market while giving European goods better access to Indian consumers.
Under this agreement, both sides agree to gradually lower tariffs on products that previously faced high duties, especially in sectors that are vital for industry and employment. The FTA is part of a broader effort to deepen trade and investment ties, expand market access, and create a more balanced trading relationship between India and the EU.
Key Sectors and Products Covered
Textiles and Apparel
One of the biggest gains for India under the India-EU Trade deal will come from the textiles and apparel sector. Textiles are among India’s largest export sectors, with garments and fabrics making up a significant portion of exports to Europe.
Currently, Indian textile exports to the EU face tariffs between 12 to 16 percent, which makes Indian products less competitive compared with those from countries that already enjoy free access. The new deal is expected to remove or drastically lower these duties, helping Indian textile manufacturers increase market share and reduce prices for European buyers.
Footwear and Leather Goods
Footwear and leather products are highly labour-intensive sectors that directly support millions of jobs across India. These products currently attract moderate EU tariffs, and duty cuts will help Indian exports become more price competitive. Removing tariffs will encourage European retailers to source more footwear and leather accessories from Indian producers, particularly from traditional clusters in regions such as Agra, Kanpur, and Chennai.
Automobiles and Auto Parts
The automobile industry stands to benefit from one of the most significant tariff reforms under the India-EU Trade pact. India currently imposes duties as high as 110 percent or more on imported cars, while the EU also applies tariffs on Indian automotive exports. The deal will see tariffs on cars significantly reduced, with phased cuts over a period of years. This will benefit both Indian auto exporters and European manufacturers like Volkswagen, BMW, and Mercedes-Benz, which have struggled to expand sales in India due to steep import taxes.
Wines and Spirits
Imported wines and spirits are another category where the deal will have a major impact. India’s current tariffs on European wines and spirits are among the highest in the world, sometimes reaching over 150 percent. Under the trade deal, these tariffs will be reduced through a phased approach, making European wines and other alcoholic beverages more affordable in the Indian market. While Indian wines will also gain better access to European consumers, the deal carefully balances duty reductions to protect domestic producers.
Economic Impact and Trade Figures
The EU is India’s largest goods trading partner, with bilateral trade exceeding $190 billion in 2024–25, including exports exceeding $75 billion and imports around $60 billion. The EU market accounts for a significant share of India’s exports, representing about 17 percent of India’s total exports, while Indian goods constitute around 9 percent of EU exports.
The trade agreement has the potential to boost India’s exports by tens of billions of dollars over the next decade as tariff reductions take effect. Industries such as textiles, automobiles, leather, and footwear are expected to lead this expansion, with increased competitiveness in European markets helping Indian companies scale up production and create jobs.
Benefits of the Deal
1. More Competitive Exports
With import duties lowered or eliminated for many products, Indian exporters can sell their goods in the EU at more competitive prices. This will help sectors like apparel, leather, and automobiles gain market share and support India’s export growth ambitions.
2. Lower Prices for Consumers
European consumers could benefit from lower prices on Indian goods such as textiles and automobiles. Similarly, Indian consumers will see greater variety and lower costs for European products such as wines, spirits, and premium vehicles.
3. Boost to Manufacturing and Jobs
Industries that employ millions of workers stand to gain from expanded export markets. A reduction in tariffs will encourage investment, boost manufacturing output, and help maintain jobs in labour-intensive sectors like textiles and footwear.
4. Strengthened India-EU Relations
The trade deal will further cement economic cooperation between India and the EU, creating a more stable and mutually beneficial relationship. It will also counterbalance global trade tensions and provide an alternative to protectionist policies seen in other parts of the world.
Challenges and Considerations
While the India-EU Trade deal brings many benefits, it also includes difficult negotiations around sensitive sectors. Agriculture and dairy products, for example, remain excluded from full tariff liberalization due to domestic political and economic sensitivities. Additionally, some regulatory standards and compliance requirements will need to be harmonized before the pact can be fully implemented.
The agreement must also go through ratification processes in multiple EU member states and in India, which could delay full implementation. Even after signing, phase-in periods of tariff reductions may span several years for certain products to protect domestic industries.
What This Means for Investors
For those conducting stock research or tracking markets, sectors poised to benefit from the India-EU Trade deal are worth watching closely. Indian companies in textiles, leather, automobiles, and footwear could see increased investor interest as trade barriers fall and export prospects grow.
Indian stock market segments tied to manufacturing and exports may outperform as global demand rises and cost competitiveness improves. Equities in auto companies like Tata Motors, Mahindra & Mahindra, and large textile firms could attract both domestic and foreign capital on expectations of stronger profit growth.
Frequently Asked Questions
The India-EU Trade deal is a free trade agreement between India and the European Union that will reduce or eliminate import duties on a wide range of goods to boost bilateral trade and economic cooperation.
Key products expected to benefit from tariff cuts include textiles, footwear, cars, wines, and other manufactured goods where duties were previously high.
Indian exporters will find it easier to sell their goods in the EU at competitive prices, potentially leading to higher export volumes, stronger revenues, and job growth in key industries.
Disclaimer:
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.
