India-EU seal FTA: Tariff elimination, big duty cuts on cars, chemicals and beer; top points on 'mother of all deals'

India and the European Union have finalised a landmark trade deal, Prime Minister Narendra Modi said on Tuesday, ending nearly two decades of on-and-off negotiations and setting the stage for a major reset in trade terms between New Delhi and the 27-nation bloc.

The agreement is expected to pave the way for India to open up its vast and closely protected market to freer trade with the EU, India’s biggest trading partner, at a time when both sides are also looking to hedge against fickle ties with the United States.

Here are the top announcements made under the pact:

1. Tariffs cut across most EU goods exports

A key headline claim from the EU is the scale of tariff easing. The bloc says tariffs on over 90% of EU goods exports to India will be eliminated or reduced, signalling a broad opening across product categories rather than a narrow deal focused on a few sectors.

This is expected to translate into substantial cost savings for European exporters. The EU has projected duty savings of up to €4 billion per year on European products once the changes are implemented.

2. High-duty sectors: machinery, chemicals and pharmaceuticals in the spotlight

The EU’s announcement makes clear that some of India’s highest tariff lines are part of the tariff reduction plan. It says duties of up to 44% on machinery, 22% on chemicals, and 11% on pharmaceuticals will be mostly eliminated.

The chemicals segment appears to be among the biggest beneficiaries, with the EU saying tariffs on its chemicals will be eliminated for almost all products. That matters because chemicals feed into a wide industrial ecosystem, from manufacturing inputs to downstream sectors like pharmaceuticals and consumer goods.

3. Medical devices, aircraft and aerospace products to see deep tariff elimination

Beyond general reductions, the announcement outlines sharp changes for specific high-value sectors. The EU says tariffs on optical, medical and surgical equipment will be eliminated for 90% of products, which could affect the pricing and availability of imported devices used in hospitals and clinics.

It also states that tariffs on aircraft and spacecraft will be eliminated for almost all products, an area likely to be closely watched given India’s growing aviation market and long-term aerospace ambitions.

4. Car tariffs to fall gradually to 10%, with a capped annual quota

For Indian consumers and the auto industry, one of the most attention-grabbing parts of the announcement is the pathway to reduced car duty. The EU says tariffs on cars will gradually come down to 10%, with a quota of 2,50,000 vehicles per year.

This means only the first 2,50,000 vehicles imported annually under the deal are eligible for the reduced tariff benefit.

5. Privileged access for EU service providers in key areas

The deal’s scope is not limited to goods. The EU says it will get privileged access to India for service providers in key areas such as financial and maritime services.

That could have implications across sectors like banking, insurance, asset management, shipping-linked services and global logistics, areas where access terms often carry long-term regulatory and commercial consequences.

6. Food and beverage duties to ease: olive oil, vegetable oils, beer and wine

The EU’s announcement also includes duty cuts for select consumer imports, including olive oil, margarine and vegetable oils. On alcohol, it says tariffs on EU beer will be cut to 50%.

The announcement also follows a duty cut of about 20-30% on the EU's wine.

7. EU signals climate support alongside trade easing

In addition to trade provisions, the EU has flagged a climate-linked support plan. It says €500 million in EU support over the next two years is envisaged to help India’s efforts to cut greenhouse gas emissions.

8. EU projects exports to India could double by 2032

Looking ahead, the EU expects the deal to materially alter trade flows. It says the agreement is expected to double EU trade exports to India by 2032.

(With inputs from Reuters)