On January 27th, reports emerged that India and the EU had clinched a trade pact. Under this agreement, India has consented to provide European automakers with larger import quotas, substantially cut tariffs, and create more opportunities in its automotive market, which has been heavily protected for a long time.

According to the terms of the agreement, India will progressively permit up to 250,000 European-built vehicles to enter the country at preferential tariff rates. This figure is a stark contrast to the mere 37,000-vehicle quota allocated to the UK. Specifically, import tariffs on around 160,000 internal combustion engine vehicles will be slashed to 10% within five years. Meanwhile, tariffs on 90,000 electric vehicles will be adjusted in the tenth year, a move aimed at safeguarding India's nascent electric vehicle sector.

For the majority of vehicles, the initial quota tariffs will kick off at approximately 30%. As for quantities surpassing the quota, tariffs on fuel-powered vehicles will be trimmed down to 35% within a decade. In comparison to India's existing vehicle import tariffs, which can soar as high as 110%, this tariff reduction is indeed substantial. This quota setup signifies that both parties are reshaping their economic ties through this trade agreement.