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European carmakers, which will get market access in India next year under India’s free trade agreement (FTA) with the European Union (EU), may soon set up manufacturing units in India, Union Commerce Minister Piyush Goyal said on Tuesday.
“When we negotiated the FTA, we of course gave them an opportunity to send their cars to India. But when I engaged with the auto industry of Europe, they recognised that they need market access in India only to test the market and see which one (model) has appetite in India,” Goyal said at the curtain-raiser event for the Bharat Mobility Global Expo in New Delhi.
Once the European carmakers assess the demand in India, they would set up manufacturing units not only to sell in India but also to the entire world, Goyal added.
“They (European carmakers) were always an export oriented set of manufacturers who never looked at domestic demand as much as they looked at international demand. But they are now realising that, at Europe’s manufacturing cost and regulatory burden, they will not be able to compete with the global market,” the minister said.
India’s FTA with the EU offers phased tariff concessions on cars under a limited annual quota. The two economies are set to sign the trade agreement by December, and it is expected to take effect in the first half of next year.
India’s FTA with the EU, once operationalised next year, is expected to give a strong boost to exports, Goyal said. India has concluded eight trade agreements over the past six years and is negotiating with a few more economies as it seeks to diversify trade and widen market access for domestic exporters.
India’s FTAs have the potential to facilitate preferential access for Indian exports to nearly 75 per cent of the global gross domestic product (GDP), Goyal said.
India-US trade deal:
Among other partners, India is also negotiating a bilateral trade agreement (BTA) with the United States (US) and aims to finalise an interim deal soon.
Separately, a government official said that a two-member team visited New Delhi earlier this month for trade talks. The two sides discussed trade and customs facilitation issues last week, the official added.
India and the US began trade negotiations in March last year and reached an agreement in February this year. Under the joint statement issued in February, Washington had agreed to cut reciprocal tariffs on India to 18 per cent from 25 per cent, while New Delhi committed to increasing energy purchases from the US. However, the US Supreme Court later struck down the legal basis for the reciprocal tariffs, prompting both sides to resume negotiations on revised terms.
Since then, both sides have been engaging to finalise the updated terms of the deal based on the framework that was agreed in February. The US is India’s top export destination, accounting for nearly 20 per cent of annual shipments, and it had a trade deficit of around $34 billion with India in 2025-26.
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