Why is India-EU trade agreement significant?, Pg15

Key Highlights:

• India and the European Union (EU) concluded negotiations for a Free Trade Agreement (FTA) on January 27, after two decades of talks.
• The EU will eliminate duties on approximately 70.4% of tariff lines immediately, covering about 90.7% of India’s export value.
• Bilateral merchandise trade between India and the EU was ₹11.5 lakh crore ($136.54 billion) in 2024-25, with Indian exports accounting for about ₹6.4 lakh crore ($75.85 billion).
• Key Indian sectors like textiles, apparel, marine, leather, and gems & jewellery are expected to benefit significantly from reduced tariffs.
• India has offered to eliminate duties on about 49.6% of tariff lines immediately, covering 30.6% of trade value for the EU.

Detailed Insights:

• The India-EU FTA aims to boost economic ties by creating a combined market size of approximately ₹2,091.6 lakh crore ($24 trillion).
• The agreement offers broader commitments across 144 service sub-sectors, including IT/ITeS, professional services, and education.
• Sectors like textiles, leather, and marine products, currently facing tariffs of 4-26%, will gain from preferential market access in the EU.
• Indian traditional medicine services (AYUSH) will benefit, allowing practitioners to offer services in EU countries where regulations permit.
• India has kept sensitive agricultural sectors like beef, dairy, and cereals out of the deal, while the EU has excluded beef, sugar and rice.
• Tariffs on European wine will be reduced in phases to 30% for wine priced between 2.5 to 10 euros and to 20% for wine over 10 euros, with quotas.
• The FTA aims to reduce tariffs on motor vehicles to 10% from the current 110%, under a quota system, excluding cars below ₹25 lakh.
• A concern is the Carbon Border Adjustment Mechanism (CBAM), with India securing a commitment to receive any CBAM concessions the EU offers to other countries.

Key Concepts Involved:

• Free Trade Agreement (FTA): An agreement between two or more countries to reduce or eliminate trade barriers such as tariffs and quotas.
• Tariff Lines: Specific product categories subject to import or export duties, as defined in a country's tariff schedule.
• Carbon Border Adjustment Mechanism (CBAM): A tariff on carbon-intensive products imported from countries with less stringent climate policies.