The ongoing Free Trade Agreement (FTA) discussions between India and the European Union (EU) have entered a crucial stage, with both sides aiming to finalise the deal by the end of 2025. However, several areas continue to be classified as “sensitive,” and the automobile industry is among the top sectors requiring deeper dialogue and careful negotiation.
Key Highlights
India and the EU are working to bridge differences over tariffs, carbon levies, and industrial goods.
The auto sector, along with steel and carbon emission rules, has been flagged as “sensitive.”
Both parties agree that any trade pact must be balanced, equitable, and mutually beneficial
The automobile sector remains a challenging topic for both India and the EU due to differing trade interests.
The European Union is seeking lower import duties on fully built vehicles and auto components exported to India. Currently, India imposes tariffs of up to 100–125% on imported cars, among the highest in the world.
On the other hand, India views its domestic automobile industry as a cornerstone of national growth — providing large-scale employment, attracting foreign investment, and supporting the government’s Make in India and Atmanirbhar Bharat initiatives.
A sudden tariff cut could expose Indian manufacturers to tough foreign competition, especially in the luxury and electric vehicle (EV) segments.
Government’s Position
Commerce and Industry Minister Piyush Goyal has reaffirmed India’s commitment to achieving a fair deal that safeguards local industries. The Indian side has emphasized that the FTA should not disrupt sectors vital to national manufacturing and employment.
The government is reportedly open to gradual tariff reductions or limited import quotas for European vehicles, instead of an immediate, across-the-board duty cut. Such measures would allow local automakers time to adapt to increased competition.
What the EU Wants
For the EU, India represents one of the largest untapped automobile markets in Asia. European carmakers — especially from Germany, France, and Italy — are keen to gain easier market access.
They are also pushing for smoother regulatory approval processes and better alignment of vehicle safety and emission standards.
In return, the EU has offered India improved access for textiles, engineering goods, and IT services in the European market.
Other Sensitive Areas
Apart from automobiles, negotiations are ongoing around:
Steel and industrial goods, where both sides must balance tariffs and sustainability commitments.
The Carbon Border Adjustment Mechanism (CBAM), which the EU plans to implement for carbon-intensive imports, including metals and vehicles. India is seeking flexibility in its application to protect domestic exporters.
Road Ahead
Both sides are expected to continue technical talks over the coming months, with a focus on finalising the framework for goods, investment, and sustainable development chapters. The next round of negotiations is likely to take place in Brussels later this year.
Officials have expressed optimism but acknowledge that resolving auto-related issues will be critical for the FTA’s success. A balanced agreement could boost trade flows, attract investment, and strengthen India-EU strategic ties — but a hasty deal might risk unsettling India’s growing automobile ecosystem.
The India-EU Free Trade Agreement is within reach, yet the automobile sector remains a key hurdle. Finding common ground — through phased tariff adjustments, fair carbon rules, and mutual recognition of standards — will decide how soon both sides can sign this historic pact.