India-EU FTA opens 97% tariff lines, zero duty for most exports by 2027

PRime government minister Narendra Modi and European Council chairwoman emmetónio Costa on with European charge president Ursula von der Leyen on Tuesday announced the conclusion of a landmark trade deal between the two behemoths, which is expected to be signed after legal scrubbing over the next 5-6 months, a commerce ministry official said on condition of anonymity.The free trade agreement (FTA) between India and the European Union (EU) allows preferential access to 97% of tariff lines for Indian goods in the EU markets, covering 99.5% of the trade value.Operationalisation of the deal, which is expected early 2027 after regulatory approvals with respective governments, will see immediate duty elimination for 70.4% tariff lines covering 90.7% of India’s exports. This will cover sectors such as textiles, leather and footwear, tea, coffee, spices, sports goods, toys, gems and jewellery and certain marine products.According to the deal, 20.3% tariff lines covering 2.9% of India’s exports will have zero duty access over three years for items like certain marine products, processed food items, arms and ammunition.It will allow preferential access to 6.1% tariff lines covering 6% of India’s exports by way of tariff reduction for certain poultry products, preserved vegetables, bakery products amongst others or through tariff rate quota (TRQs) for cars, steel, certain shrimps and prawns products, amongst others.Key labour-intensive sectors such as textiles, apparel, marine, leather, footwear, chemicals, plastics/rubber, sports goods, toys, gems, and jewellery, comprising more than $33 billion ( ₹2.87 lakh crore) of exports that are currently subjected to import duty between 4% to 26% in the EU and are crucial for employment generation, will enter zero duty from entry into force of the FTA and thus gain enhanced competitiveness in the EU market.“These sectors are poised to benefit from tariff liberalisation and enhanced competitiveness, enabling deeper integration into global and European value chains and simultaneously creating job opportunities,” a commerce ministry official said.In return, India offered 92.1% of its tariff lines that cover 97.5% of the EU exports. While 49.6% of tariff lines will have immediate duty elimination, 39.5% of tariffs lines are subject to phased elimination over five, seven and 10 years, and 3% of products are under phased tariff reductions and few products are subject to TRQs for example apples, pears, peaches, kiwi fruit.“Imports of EU’s high technology goods are expected to diversify India’s import sources, thereby reducing input costs for businesses, benefit consumers and will create opportunities for Indian businesses to integrate into global supply chains,” the official said.India secured preferential market access for agricultural products such as tea, coffee, spices, grapes, gherkins and cucumbers, dried onion, fresh vegetables and fruits as well as for processed food products. These items will become more competitive in the EU markets, he said.“This market access will strengthen farmers’ realised incomes, reinforce rural livelihoods, and elevate the global competitiveness of Indian agricultural products,” he said.