Top European Union officials joined India's grandiose Republic Day parade as the guests of honor on Monday, a day before New Delhi and Brussels are expected to seal a long-awaited free trade agreement, touted as the "mother of all deals."
Military bands and horse and camel cavalry units paraded through the capital, New Delhi, while fighter jets buzzed overhead and India's latest military hardware was put on display.
"The occasion inspires us in our collective resolve to build a developed India," India's Prime Minister Narendra Modi said before the parade.
The fanfare also featured Indian air defense systems – including missiles and drones – that were deployed in the four-day conflict with archenemy Pakistan last year, an Agence France-Presse (AFP) report said.
European Council President Antonio Costa and European Commission President Ursula von der Leyen are both in attendance, before an EU-India summit on Tuesday, when the two sides are widely expected to announce a landmark free trade deal and security partnership.
They had been working on a trade agreement for over a decade before U.S. President Donald Trump's trade tariffs pushed India and the 27-nation EU to expedite their efforts last year.
The deal, being called "the mother of all deals" by von der Leyen, could expand bilateral trade and lift Indian exports of goods such as textiles and jewelry, which have been hit by 50% U.S. tariffs since late August.
According to an exclusive report by Reuters, India is said to be planning to slash tariffs on cars imported from the EU to 40% from as high as 110%, in the biggest opening yet of the country's vast market.
Modi's government has agreed to immediately reduce the tax on a limited number of cars from the 27-nation bloc with an import price of more than 15,000 euros ($17,739), two sources briefed on the talks told Reuters.
This will be further lowered to 10% over time, they added, easing access to the Indian market for European automakers such as Volkswagen, Mercedes-Benz and BMW.
The sources declined to be identified as the talks are confidential and could be subject to last-minute changes. India's commerce ministry and the European Commission declined to comment.
India is the world's third-largest car market by sales after the U.S. and China, but its domestic auto industry has been one of the most protected. New Delhi currently levies tariffs of 70% and 110% on imported cars, a level often criticized by executives, including Tesla chief Elon Musk.
New Delhi has proposed slashing import duties to 40% immediately for about 200,000 combustion-engine cars a year, one of the sources said, its most aggressive move yet to open up the sector. This quota could be subject to last-minute changes, the source added.
Battery electric vehicles will be excluded from import duty reductions for the first five years to protect investments by domestic players like Mahindra & Mahindra and Tata Motors in the nascent sector, the two sources said. After five years, EVs will follow similar duty cuts.
European carmakers currently hold a less than 4% share of India's 4.4-million units a year car market, which is dominated by Japan's Suzuki Motor as well as homegrown brands Mahindra and Tata that together hold two-thirds.
With the Indian market expected to grow to 6 million units a year by 2030, some companies are already lining up new investment.
Renault is making a comeback in India with a new strategy as it seeks growth outside Europe, where Chinese carmakers are making strong inroads, and Volkswagen Group is finalizing its next leg of investment in India through its Skoda brand, the Reuters report said.
India is on track to become the world's fourth-largest economy this year, according to International Monetary Fund (IMF) projections.
Bilateral India-EU trade in goods reached 120 billion euros ($139 billion) in 2024, an increase of nearly 90% over the past decade, according to EU figures, with a further 60 billion euros ($69 billion) in trade in services.
The pact would be a major win for Brussels and New Delhi as both seek to open up new markets to counter U.S. tariffs and Chinese export controls.
While the EU sees India as an important market, New Delhi sees Brussels as an important source of much-needed technology and investments to rapidly upscale its infrastructure and create millions of new jobs for its people.
