Key Points
- Luxury European cars (BMW, Mercedes) tariffs drop from 110% to 10%, with a 250,000-unit annual quota.
- Wine and spirits taxes slashed: wine from 150% to 20-30%, beer to 50%, spirits to 40%.
- 90% of medical/surgical equipment becomes tax-free; machinery duties (up to 44%) and chemicals (22%) eliminated.
- India gains: Lower EU tariffs on textiles, leather; simplified pharma approvals; relief from EU carbon tax.
- EU benefits: Easier sales for autos, IT/services; new opportunities in Indian defense, engineering.
India and the European Union have struck a historic Free Trade Agreement (FTA) after nearly 18 years of marathon negotiations, announced at the 16th India-EU Summit on January 27, 2026. According to PTI and EU trade commissioner statements, the deal could enter force by early 2027, reshaping trade between the world’s fourth- and second-largest economies, which together represent 25% of global GDP and one-third of world trade.
Luxury Cars and Booze Get Cheaper in India
Indian consumers stand to gain the most from slashed import duties on high-end European autos. Tariffs on brands like BMW, Mercedes, and Porsche, currently at 110%, will phase down to 10% over time, with an initial cut to 40% for vehicles over €15,000. India has capped imports at 250,000 units yearly to protect domestic makers, yet experts predict price drops of 30-50% on models like the BMW 7 Series or Mercedes S-Class.
Alcohol duties see similar relief: European wines drop from 150% to 20-30%, beer from 110% to 50%, and spirits to 40%. Olive oil, margarine, and vegetable oils turn tax-free, easing costs for importers and boosting gourmet food access amid India’s rising middle-class demand.
Medical, Machinery, and Aviation Boost
The pact eliminates duties on 90% of medical and surgical equipment, alongside chemicals (22% cut), machinery (up to 44% eliminated), aircraft, and aerospace gear. This could lower healthcare costs by 20-30% and supercharge India’s aviation sector, including ISRO projects, as tariff-free imports flow in. Recent EU data shows bilateral trade hit €120 billion in 2025, with India’s exports up 10% year-on-year.
Wins for Europe: Premium Autos, Services Surge
EU exporters cheer easier entry into India’s 1.4 billion market. Premium carmakers gain from duty cuts and quotas, while IT, telecom, engineering, and business services snag more contracts. France and Germany may build distribution hubs, opening EU defense funds to Indian arms firms.
India’s Gains: Textiles, Pharma, and Green Relief
India secures zero or low duties (around 10%) on textiles, footwear, and leather goods, potentially lifting exports by 15-20%. Pharma and chemicals could grow 20-30% yearly via streamlined drug approvals. Crucially, relief from the EU’s Carbon Border Adjustment Mechanism shields steel, aluminum, and hydrogen sectors, saving billions in levies.
As of January 27, 2026, both sides hail the deal amid global trade tensions, with implementation talks focusing on rules of origin and labor standards. Analysts forecast a $50 billion trade surge by 2030.
