An Overview of India-EU FTA
India and the European Union (EU) have signed a historic deal called the “Mother of all deals“. It covers a combined market size of around $24 trillion, i.e., 25% of the world’s GDP. Signed between the fourth-largest and second-largest economies of the world, the strategic Free Trade Agreement (FTA) grants Indian exporters sweeping tariff-free access to the EU market.
The FTA covers a wide spectrum, and it is expected to strongly benefit the Indian textiles, chemicals, pharmaceuticals, footwear, and fisheries sectors. As per the agreement, India will eliminate high duties on industrial products such as chemicals, car parts, textiles, plastics, boats, and machinery. The elimination of high-tariff barriers will allow the EU a significant market share for alcoholic beverages (such as wine, spirits, and beer), and fruits (kiwis & pears), among others.
Impact of the Historic India-EU FTA on Indian Exports
India is a major exporter of petroleum products, steel, pharmaceuticals, electronics, and auto parts to the European Union. The strategic megadeal will make Indian products, particularly textile exports, highly competitive, giving an edge to Indian exporters over those in Bangladesh and Pakistan.
Here’s a quick breakdown of the impact of the India-EU FTA on Indian exports, according to a fact sheet released by the Govt of India:
Which European Products will Get Cheaper in India?
Here’s a quick breakdown of the current and future import tariffs on European products sold in India:
Which Indian Sectors will Benefit the Most from the ‘Mother of All Deals’?
1. Manufacturing
The manufacturing sector of India is highly critical for the country’s economy as it contributes to a whopping 17% of the GDP. India-EU FTA is considered a strategic deal for this sector as it will positively impact local manufacturing, boost India’s production capacity, and boost export expansions.
2. Chemical
Currently, India exports chemicals worth 3.5 Billion Euros to Europe. As Europe slashes the import duty from 22% to 0%, the chemical industry in India will benefit tremendously from billions in trade value and enhanced export resilience.
3. Premium Passenger Vehicle
India has committed to reducing the import duties on fully built luxurious European cars in a phased manner. It is said to benefit the performance-focused AMG and premium Maybach models, while boosting the overall automotive segment, increasing market competition, and uplifting consumer expectations.
4. Textile & Footwear
India has secured tariff-free access on 100% of its textile and apparel tariff lines. Similarly, it
has made a provision to eliminate tariffs on leather and footwear products imported from Europe. As a result, footwear, leather, textiles, and other labor-intensive sectors will largely benefit from increased job opportunities, innovation, and broader market integration.
5. Pharma and Medical Equipment Manufacturing
India has committed to eliminating tariffs of up to 6.7% on medical appliances, testing instruments, and vital supplies to zero. The agreement paves the way for the introduction of modern cutting-edge innovation in the country’s medical devices manufacturing sector, improving the overall quality of treatment, enhancing diagnosis accuracy, and increasing survival rates for critical diseases.
6. Defence & Aerospace Manufacturing
The Indian defence equipment industry will benefit from a structured partnership framework and industrial collaborations. Indian defence companies can participate in the European defence programs and explore new opportunities for building aircraft engines, missiles, submarines, and naval platforms
7. Wines, Spirits & Beers
While there will be no duty concessions for wines priced below 2.5 euros, the duty on premium European wines, spirits, and beers will fall from 150% to 20% gradually. Similarly, the alcohol and distillery manufacturers in India will be able to enter the European market with duty concessions and capitalize on new growth opportunities.
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