Ready for the FTA? Mechanical engineering

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Italian mechanical engineering and the EU–India FTA: duties go to zero, but almost always in stages

Mechanical engineering is the backbone of Italy's exports to India. In 2025 the Observatory's B1 sector, which covers machinery, electrical equipment, measuring instruments, tools and hardware, was worth €2.35 billion: 44% of the Italian exports to India tracked by the Observatory. For textile machinery, India became the leading market in 2025, ahead of China; for machine tools it ranks fourth.

The EU–India Free Trade Agreement (FTA) removes an average duty of 9.4% from these exports. It removes it almost entirely: by 2034, 89% of mechanical engineering tariff lines and 90% of export value reach zero duty. But it does so gradually: at entry into force, expected in 2027, three lines in ten go to zero, accounting for 20% of exports.

In this analysis we read the agreement's tariff schedules line by line, sub-sector by sub-sector and in both directions: European mechanical engineering goods entering India, and Indian goods entering Europe.

The big picture: an average duty of 9.4%, halved by 2030

The B1 perimeter covers 1,828 eight-digit Indian tariff lines in chapters 82, 83, 84, 85 and 90. The base duty, that is the basic customs duty plus surcharges, averages 9.4%. For a typical machine it is 8.3%: 7.5% basic customs duty and a 0.75% social welfare surcharge.

The agreement removes this duty on different timelines:

30% of lines at zero immediately, from entry into force: 20% of Italian export value;
46% by 2032, 32% by value;
89% by 2034, 90% by value;
96.5% by 2037, 98% by value. The remaining 64 lines never reach zero: they are mostly exclusions in consumer electronics and electrical equipment.

The rule that matters most is category E7, which covers 43% of lines and 59% of exports. The duty falls in eight equal annual cuts: the first at entry into force, the others every 1 January, reaching zero in 2034. Halfway through, in 2030, the duty has already been halved. On a €100,000 machine with an 8.3% duty, the duty falls from about €8,300 to €4,150 in 2030 and to zero in 2034.

Across mechanical engineering as a whole, the average duty falls from 9.4% today to 6.4% in 2027, 3.8% in 2030, 2.0% in 2032 and 0.8% in 2034.

The agreement removes customs duty, not IGST, India's import tax equivalent to VAT. IGST remains payable, but a registered buyer recovers it as an input tax credit: what matters for the final price is mainly the duty.

Companies selling in India through their own subsidiary should also consider the Special Valuation Branch (SVB) of Indian Customs. The SVB checks whether the price between companies of the same group has been influenced by their relationship. During the review, goods are cleared under provisional assessment against a bond, and the process can take a long time. The agreement does not change this procedure: with zero duty the stakes are lower, but the declared value remains the basis on which IGST is calculated. Transfer prices, royalties and documentation should therefore be aligned well in advance.

Sub-sector by sub-sector: who reaches zero first

The chart shows, for each sub-sector, the year in which India's duty reaches zero and the share of lines at each deadline. On the right are today's average duty and Italian exports in 2025: sub-sectors are ordered by export value.

The fastest. Textile machinery (47% of lines at zero immediately), electronics and telecoms (45%), measuring and control instruments (36%). In metalworking machinery a third of lines go to zero immediately, including many lathes, milling machines and laser machines. Gears and gearboxes are also duty-free from day one.
Most in eight years. This is the path for all plastics and rubber machinery and moulds, 83% of lines for wood, stone and glass machinery, 73% of other industrial machinery, 72% of pumps and compressors and 69% of valves and taps.
In six years. Presses, press brakes and welding machines, almost half the lines for electric motors, generators and transformers, and much of small household appliances.
The slowest. Combustion engines and turbines start from an average duty of 13.1%, among the highest in the sector, and 43% of their lines reach zero only in 2037: mostly engine parts. Crankshafts, bearing housings and couplings, and some air conditioners, also reach zero only in 2037.
The exclusions. 6% of electrical equipment lines stay out, including low-voltage control panels and parts of switchgear: lines worth about €30 million of Italian exports. In consumer electronics 14% of lines are excluded, such as televisions and loudspeakers.

The same product family can follow different paths depending on its eight-digit line. The first check is therefore the exact classification of your own product.

The other flow: Indian mechanical engineering in Europe

In the other direction the game is much shorter. EU duties on mechanical engineering are already low: 2.1% on average across the 1,479 lines of the EU schedule. Under the agreement, 91% of lines go to zero immediately, 98.5% by 2032 and all of them by 2034.

The few exceptions follow longer paths:

By 2030: combustion engines and turbines, laser, ultrasonic and plasma machines, industrial sewing machines, batteries, some transformers and some hand tools, currently between 3.2% and 4.7%.
By 2032: outboard motors, microwave ovens, blades, some household sewing machines and bearing housings, currently between 5% and 6.7%.
By 2034: televisions and monitors (14%), steel knives and cutlery (8.5%), needle roller bearings (8%) and some household sewing machines (9.7%).

In 2025 Italy imported €1.59 billion of mechanical engineering goods from India, about two thirds of what it exported there. The largest items are electronics and telecoms (€585 million), bearings and power transmission (168), electric motors and transformers (165), electrical equipment and cables (154) and combustion engines (142).

For Italian companies this flow matters in two ways.

Sourcing. Indian bearings, electric motors, valves, pumps and components will carry one to four percentage points less duty. The margin is small, but for those buying components in volume it adds to India's lower production costs.
Competition. Indian producers gain the same margin on the European market, especially in more standardised segments. The tariff advantage is modest: the contest will be decided on quality, certification and service.

The asymmetry is the real news of the agreement for mechanical engineering: the EU gives up an average duty of 2%, India one of over 9%.

What to do now

For those exporting machinery to India, the agreement will not change the market overnight: it makes it more accessible year by year. The agreement's timelines leave room to prepare properly.

Check the eight-digit line. The duty path depends on the product's exact classification in India's schedule, not on its sub-sector.
Check origin. The preferential duty applies only to machines that meet the agreement's rules of origin. Those using non-EU components should check the product-specific rules and prepare the origin documentation.
Build price lists around the path. Under the eight-year path, half the benefit is there by 2030: offers and multi-year contracts can already factor it in.
Track technical requirements. In January 2026 India withdrew the general BIS certification requirement for machinery and electrical equipment, which would have taken effect in September 2026. Quality Control Orders on individual products and components still apply.
Strengthen local presence. Technical service, spare parts and training weigh on Indian customers' choices as much as price. Spare parts, too, mostly reach zero over eight years.

Those who move now, before duties fall, can build relationships, service networks and brand recognition. Competitors who arrive later will find the ground already taken.

Methodology and sources

Scope. Sector B1 (Mechanical engineering) of the 14-sector taxonomy of the Italy–India Economic Observatory, version of 7 November 2026: 159 HS4 headings in chapters 82, 83, 84, 85 and 90, corresponding to 1,828 Indian tariff lines and 1,479 EU lines. Agricultural and food machinery fall under sector B2, lifting and earth-moving machinery under B3. Lines are grouped into 17 sub-sectors.

Calculations. Shares count the eight-digit tariff lines in the agreement's schedules: Appendix 2-A-2 for India, Appendix 2-A-1 for the EU. The average duty is a simple average of base duties, not weighted by trade value. Shares by value use 2025 exports and imports from the Observatory's database, split equally among the Indian lines of each HS4 heading. Trade-weighted estimates give higher average duties: Khaitan & Co puts India's at 18.0% on European machinery and the EU's at 3.4% on Indian machinery (2025).

Timing. Entry into force is assumed in 2027. Cuts after the first take effect on 1 January each year, as provided in Annex 2-A.

Sources