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India removes small-car relief in new fuel emission rules

India has decided to drop the proposed special concession for small petrol cars in its upcoming fuel-efficiency and emission norms, following objections from several domestic automakers. The move is part of a revised draft of the Corporate Average Fuel Efficiency (CAFE) regulations, which will come into force from April 2027 and remain valid for five years.

Earlier, the draft rules had offered relaxed emission targets for petrol cars weighing 909 kg or less. This provision was strongly opposed by companies such as Tata Motors and Mahindra & Mahindra, which argued that it would unfairly favour one manufacturer that dominates the small-car segment. Industry executives said the concession would distort competition rather than promote genuine fuel-efficiency improvements.

After reviewing the feedback, the government removed the small-car exemption and introduced a more uniform framework. The revised draft tightens emission targets across the passenger vehicle segment and reduces the scope for weight-based advantages. All passenger vehicles with a gross weight of up to 3,500 kg will now be assessed under the same broad efficiency principles.

Under the new proposal, average fleet carbon dioxide emissions must fall steadily, reaching about 100 grams per kilometre by 2032, compared to roughly 114 g/km currently. The targets could become even stricter if electric vehicles gain a higher share of overall car sales.

To support the shift towards cleaner mobility, the draft rules provide incentives for electric vehicles and plug-in hybrids through a credit-based system. Automakers that exceed targets can earn credits, while those falling short will need to buy credits or face penalties. Companies may also pool compliance performance with other manufacturers to meet the norms more efficiently.

Penalties for non-compliance could go up to around $550 per vehicle, making adherence financially critical for automakers.

Transport accounts for about 12% of India’s total energy consumption and is a major contributor to carbon emissions and fuel imports. Passenger vehicles form the bulk of these emissions.

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US drops 25% tariff on Indian goods

In a major relief for Indian exporters, the United States has lifted the extra 25% tariff on Indian goods that was imposed last year over India’s purchases of Russian oil. The tariff rollback, effective February 7, 2026, comes after India pledged to stop both direct and indirect imports of Russian crude, addressing a key US concern.

The decision is part of a new interim trade framework aimed at improving economic ties between the two countries. Under this agreement, the US will reduce general tariffs on Indian products to about 18%, while India will expand purchases of US goods, including energy, aircraft parts, and technology, worth up to $500 billion over the next five years.

Officials say the framework also sets the stage for closer cooperation in defence and supply chains, while easing barriers that had made it harder for Indian exports in sectors like textiles, pharmaceuticals, and machinery to compete in the US market.

This is seen as a boost for Indian businesses, as the removal of the extra levy will make exports more competitive and strengthen long-term trade relations. Both governments described the deal as a step toward a larger bilateral trade agreement, marking a new phase of economic and strategic partnership between the two nations.

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India plans $80 bn Boeing aircraft purchase

India is preparing to place one of its largest-ever aircraft orders with US aerospace giant Boeing, following a major trade agreement between the two countries. Commerce and Industry Minister Piyush Goyal said India’s planned purchase could be worth $70–80 billion, potentially exceeding $100 billion when engines, spare parts, and long-term support contracts are included.

The proposed Boeing order is part of a broader push by India to expand imports of American goods across key sectors, including aviation, energy, and advanced technology. Officials have described the demand as “ready,” signaling that negotiations with Boeing could move quickly once the trade deal is formally signed.

The US–India trade agreement is expected to be finalized in March 2026, with a joint statement likely in the coming days. As part of the deal, the United States has agreed to reduce tariffs on Indian exports, which currently average around 50%, while India will commit to purchasing roughly $500 billion worth of US products over five years, including aircraft, engines, and other high-tech equipment.

Analysts say the Boeing order could have a significant impact on both countries’ economies. For the US., it would represent one of the largest single-country sales in Boeing’s history, providing a boost to manufacturing and the aerospace supply chain. For India, the aircraft purchases will support the growth of its civil aviation sector, expand fleet capacity for airlines, and strengthen economic ties with a key trade partner.

While the deal signals a major step in bilateral trade, final details on the number of planes, delivery schedules, and pricing are still being finalized. Officials say discussions with Boeing and US authorities are ongoing to ensure that both countries maximize the benefits of the agreement.

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India eyes higher 49% FDI in public banks

The Indian government is considering raising the foreign direct investment (FDI) limit in public sector banks (PSBs) from 20% to 49% to attract capital and strengthen state-owned banks.

Officials say the proposal is under discussion, and the government would still retain majority control. Currently, private banks allow up to 74% foreign ownership.

Raising the limit for PSBs is part of efforts to boost capital, support growth, and make public banks more competitive, while keeping government oversight intact.

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India’s industrial growth rockets 7.8% in December

India’s industrial sector showed a strong revival in December 2025, with industrial output rising 7.8% year-on-year, marking the fastest growth in over two years, according to official data released on January 28. This growth rate exceeds analysts’ expectations and signals a broad-based improvement across industry.

The Index of Industrial Production (IIP), which measures the performance of manufacturing, mining, and electricity sectors, revealed that manufacturing led the expansion, growing by 8.1%. Key segments such as computers, electronics, optical products, and motor vehicles contributed significantly to the uptick.

Mining output also improved, rising 6.8%, while electricity production rebounded with a 6.3% increase, reversing the slight decline seen in November. Together, these sectors helped drive overall industrial growth and indicate robust industrial activity across the economy.

On a use-based basis, infrastructure and construction goods led the growth, supported by strong performance in consumer durables, capital goods, and intermediate goods. This indicates healthy domestic demand as well as ongoing investment activity in the industrial space.

Compared to November’s growth of 7.2%, December’s figures show a clear acceleration, underlining the momentum in factory production and industrial output toward the end of 2025. However, cumulative growth for the April–December period remains lower than the same period last year, reflecting uneven activity earlier in 2025.

Economists see December’s strong growth as a positive signal for India’s economic momentum in early 2026. The data suggest that industrial production is rebounding, supported by robust manufacturing and improving infrastructure-related activity, which could further boost employment and investment in the sector.

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India LNG buyers put long-term deals on hold

India’s liquefied natural gas (LNG) importers are deliberately slowing down long-term purchase agreements as they anticipate a sharp rise in global gas supply over the next few years. Key buyers, including state-run companies such as GAIL India and Bharat Petroleum, believe that waiting could help them secure better prices and more flexible contract terms once new LNG projects come online worldwide.

According to industry observers, global LNG supply is expected to expand significantly toward the end of this decade, driven by large projects in the United States, Qatar, and other major gas-producing regions. This surge could increase global capacity by nearly 50% by around 2030, potentially easing prices that have remained volatile since the energy shock triggered by the Russia-Ukraine conflict.

Indian buyers have been in discussions with LNG suppliers for more than a year but have avoided finalising long-term commitments. Instead, they are focusing on short-term and spot market purchases while keeping future options open. Many importers are reportedly looking at contracts that would begin closer to 2028, when the expected supply wave is likely to peak.

The cautious approach also reflects India’s struggle to raise the share of natural gas in its overall energy mix. Despite a government target of increasing gas usage to 15% by 2030, consumption has remained largely flat since 2020. High LNG prices have made gas less attractive compared to coal and other fuels, particularly for power generation and industrial use.

If LNG prices ease as expected, demand could pick up across city gas distribution networks, refineries, and petrochemical plants, helping India gradually expand gas usage. Until then, importers appear content to wait, betting that patience will strengthen their negotiating position in a rapidly changing global gas market.

In the near term, Indian companies are relatively comfortable, having secured enough LNG through contracts signed in 2024 and 2025 to meet immediate demand. This has reduced the urgency to lock in fresh long-term supply at current price levels.

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India to cut EU car import duties

India is likely to sharply reduce import duties on cars coming from the European Union as part of a comprehensive free trade agreement that is close to being finalised, sources said. The proposed move would bring down tariffs from the current levels of up to 110 per cent to around 40 per cent, marking a significant shift in India’s long-standing protectionist policy for the automobile sector.

The tariff cut is expected to play a crucial role in concluding the India-EU free trade agreement, negotiations for which have been ongoing for nearly 20 years. Officials familiar with the discussions indicate that both sides are keen to seal the deal, with an announcement possible during an upcoming India-EU summit.

Initially, the lower tariffs are likely to apply to a limited number of imported cars, particularly higher-priced models. Over time, duties could be reduced further through a phased approach. European auto majors such as BMW, Mercedes-Benz and Volkswagen are expected to benefit, as high import taxes have so far restricted their sales volumes in the Indian market.

India’s government has traditionally used steep import duties to protect domestic carmakers and encourage manufacturing within the country. To balance domestic interests, the proposed agreement is expected to include safeguards, including delayed tariff cuts for electric vehicles, allowing Indian EV manufacturers time to strengthen their production base.

India is one of the world’s fastest-growing car markets, but imported vehicles make up only a small share due to high costs. A reduction in tariffs could make premium European cars more accessible to Indian consumers while increasing competition in the sector.

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India-EU trade mega deal inches closer

India and the European Union are close to concluding a comprehensive free trade agreement (FTA), marking a major milestone in bilateral economic relations after years of negotiations. The deal is expected to be announced around the upcoming India-EU Summit on January 27, 2026, subject to formal approvals on both sides, including ratification by the European Parliament.

The proposed pact is among the most ambitious trade agreements pursued by India, covering goods, services, investment, and regulatory cooperation. Bilateral trade between India and the EU stood at an estimated $136–$190 billion in 2024–25, and the agreement is expected to provide a significant boost by lowering tariffs and easing market access for businesses on both sides.

India has taken a cautious approach during the talks, drawing clear red lines around sensitive sectors such as agriculture and dairy to protect domestic producers and rural livelihoods. It has also sought gradual tariff reductions in manufacturing to prevent sudden pressure on local industries, while aiming to attract European investment and strengthen India’s role in global supply chains.

The EU has pushed for wider access for its industrial goods, including automobiles and auto components, as well as greater opportunities in services. Climate-related trade measures have emerged as a key area of negotiation, particularly the EU’s Carbon Border Adjustment Mechanism (CBAM) and sustainability standards linked to its Green Deal. India has raised concerns that these measures could function as non-tariff barriers for energy-intensive exports, while the EU maintains they are essential to ensure fair competition and meet climate goals.

If finalised, the agreement is expected to improve export prospects for Indian sectors such as textiles, apparel, leather, engineering goods, and services, while offering European firms a larger and more predictable market in India. The deal also carries strategic weight, coming at a time when global trade is increasingly fragmented and economies are looking to diversify partnerships.

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India weighs joining Trump’s Gaza peace board

India is evaluating an invitation to participate in a US-backed international board aimed at overseeing Gaza’s reconstruction and post-conflict economic stabilization. The proposed Gaza Board of Peace is designed to coordinate funding, infrastructure rebuilding, and governance reforms, creating a platform for global and regional investors to engage in reconstruction projects.

The initiative, proposed by former US President Donald Trump, has already secured commitments from Israel, the United Arab Emirates, and several other Arab and Islamic countries, signaling potential for broad international collaboration. The board is expected to facilitate financial mobilization, infrastructure development, and humanitarian aid delivery, presenting opportunities for private and public sector partnerships in the region.

Indian authorities are reviewing the strategic and economic implications of joining the board. Participation could allow India to contribute to rebuilding efforts while gaining influence in regional development projects and strengthening diplomatic ties with Middle Eastern partners. Officials have noted that alignment with India’s long-standing position on West Asia and humanitarian diplomacy will be key factors in the final decision.

The board is expected to complement, or potentially run alongside, existing United Nations-led reconstruction and economic development frameworks, raising questions about coordination and governance. International observers suggest that effective implementation could unlock billions in aid and investment for Gaza, creating avenues for companies and development agencies to engage in infrastructure, energy, and logistics projects.

New Delhi’s decision will weigh geopolitical considerations alongside economic opportunities, balancing its global diplomatic stance with the potential to participate in a high-profile reconstruction and investment initiative.

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India-EU on the verge of a game-changing deal

Negotiations between India and the European Union are moving steadily toward a landmark free trade agreement. Ursula von der Leyen, European Commission President, described the prospective pact as historic, with wide-reaching benefits for businesses, workers, and consumers in both regions.

The agreement would connect nearly 2 billion people and cover about a quarter of the world’s GDP. It is expected to make it easier for Indian companies to enter European markets while giving European businesses greater access to India’s growing economy. Key areas include clean technologies, digital services, healthcare, and sustainable manufacturing.

Von der Leyen is expected to visit New Delhi later this month to finalise talks ahead of the India-EU summit, where progress toward signing the deal is likely to be formally announced. Leaders emphasised that political momentum is strong, although challenges such as tariffs, regulatory differences, and sensitive sectors remain to be resolved.

The India-EU trade talks, which began in 2007 and were revived in 2022, aim to deepen economic cooperation and remove barriers in goods, services, and investment. Observers say a successful agreement would be a major boost for Indian exporters and European investors alike, strengthening the long-term partnership between the two regions.

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