Reuters: India and EU close to free trade agreement

India and the European Union are close to finalising a free trade agreement, which could come into effect on January 27, Reuters reported, citing sources.

Under the deal, India is expected to reduce tariffs on cars imported from the EU from 110% to 40%. The government of Prime Minister Narendra Modi has agreed to immediately lower duties on around 200,000 vehicles from 27 EU countries valued at over €15,000 ($17,700) each. Sources told Reuters that the tariff may eventually fall to 10%, easing access for European carmakers such as Volkswagen, Mercedes-Benz, and BMW. The measure will not apply to electric vehicles for at least the first five years to protect domestic investments by Mahindra & Mahindra and Tata Motors.

The agreement is also expected to expand bilateral trade and boost Indian exports of textiles and jewellery, which have faced 50% tariffs in the United States since late August 2025.

India ranks as the world’s third-largest car market after the US and China. European automakers currently account for less than 4% of India’s 4.4 million-unit annual market, which is dominated by Suzuki Motor and domestic brands Mahindra and Tata, together holding roughly two-thirds of the market.

By Vugar Khalilov