NEW DELHI: As the India-European Union free trade agreement is poised for announcement on Tuesday, attention is sharply focused on several critical sectors where domestic industries are advocating for zero-duty concessions. These measures aim to enhance competitiveness against rivals like Bangladesh and Vietnam in the European market.
Labor-Intensive Sectors Push for Tariff Elimination
Key industries such as textiles, marine products, sports goods, toys, and leather—all labor-intensive segments—are at the forefront of demands for tariff elimination. A Sakthivel, chairman of the Apparel Export Promotion Council, emphasized the potential benefits, stating, "Once the FTA is implemented and we secure zero-duty access, we can attract more orders from the 27 EU countries. This will level the playing field with Bangladesh, especially given India's raw material advantages. A boost in apparel exports would also benefit the entire value chain, from cotton to fabrics and yarn." Currently, Indian garments face an 11% duty in the EU, compared to zero duty for products from Bangladesh.
Leather and Footwear Sector Anticipates Competitive Edge
In the leather and footwear industry, tariff reductions are seen as a significant advantage. Israr Ahmed, director of Farida Group and former vice-president of the Federation of Indian Export Organisations (FIEO), noted, "A tariff cut will provide a huge competitive edge, allowing us to match Vietnam, which already has an FTA with the EU. This support is crucial amid challenges like US tariffs." Ramesh Juneja, chairman of the Council for Leather Exports, added, "Our competitors from Pakistan and Bangladesh enjoy zero-duty access in the EU. With the FTA, we expect similar benefits, potentially increasing our exports to the EU from $2.25 billion to $6 billion by 2030."
Wines and Automobiles Under Scrutiny
Other sectors under close observation include wines and automobiles, with Indian and European negotiators agreeing to exclude agriculture—often the most contentious area in trade talks. Indian auto manufacturers express confidence in managing costs and competing with European counterparts, but they harbor concerns about Chinese companies exploiting the trade pact to sell electric vehicles (EVs) in India. Consequently, they seek protection or a transition period to allow the domestic industry to mature and safeguard investment commitments.
Auto Industry Seeks Phased Protection
This transition period would also enable Indian auto component makers to develop and integrate into the global value chain. In the internal combustion engine segment, where 90% of sales are in vehicles priced under Rs 25 lakh, there is a push for protection in the middle and smaller categories. European manufacturers face challenges in selling vehicles with on-road prices around Rs 25 lakh, potentially benefiting luxury carmakers like Mercedes, BMW, and Audi. If the UK deal serves as a template, the government may phase out concessions by gradually reducing tariffs from the current 110% with quotas. EVs, not included in the UK deal, might receive a longer transition period.
Mobility Easing for Professionals
Beyond tariffs, the FTA is expected to include mobility-related easing, facilitating access for Indian professionals and businessmen to European markets. This aspect aims to enhance bilateral trade and economic cooperation, supporting broader economic growth and integration.
Overall, the India-EU FTA represents a pivotal moment for key sectors striving to expand their global footprint through strategic tariff adjustments and market access improvements.
