The historic India–European Union Free Trade Agreement (FTA), concluded after more than 16 years of negotiations, is set to create the largest free trade zone in the world, with benefits that go well beyond tariff reductions, said Santosh Iyer, Managing Director and CEO of Mercedes-Benz India.
Speaking to Autocar Professional, Iyer said the agreement marks a significant moment for India, highlighting that the scale of the pact and its macroeconomic impact would outweigh the narrower debate around import duties.
“After more than 16 years of intense negotiations, it has finally come to reality. This actually makes the biggest free trade zone in the world,” he said, adding that the broader economic gains were far more significant than tariff changes alone.
This deal is expected to drive strong integration across supply chains, people movement, investment flows, and business cross-pollination, making it an appropriate time for India to enter such an agreement.
He said the deal could act “as a structural growth catalyst as India progresses towards becoming a $5 trillion and eventually a $10 trillion economy.”
On the strong correlation between per-capita GDP growth and luxury car demand, he informed that Mercedes-Benz India’s sales had doubled over the past decade as incomes rose. The FTA, he said, could further accelerate long-term economic expansion and consumption by simplifying trade and lowering structural barriers.
While the agreement includes tariff rationalisation across completely built units (CBUs), completely knocked-down kits (CKDs), and auto components, Iyer cautioned against expectations of immediate consumer price benefits.
He said the recent euro’s appreciation continues to offset tariff reductions, limiting any near-term pricing impact.
“The indirect advantage of macroeconomic development, GDP increase, and simplification of business with lower tariff structures is the real positive,” Iyer said, adding that the FTA could also lift consumer sentiment, including in the luxury segment, even before its full implementation.
While initial estimates suggested the agreement could come into force around 2028, there is now an effort to advance implementation to 2027, followed by an 18–24-month period for the full economic impact to materialise. “The key will lie in execution and how soon it is implemented,” he said.
From a longer-term perspective, he said the FTA positions India to gain from enhanced global trade integration, the competitiveness of its manufacturing and component ecosystem, and sustained economic growth, making it a structural, long-term win rather than a short-term trade stimulus.