India-EU free trade deal explained: Once signed, duties on 90% exports to go

THe release merchandise sell betwixt bharat and the European Union will immediately allow duty-free access to 90.7% of Indian exports in Europe’s $9.5 trillion goods and services market upon operationalisation of the pact. The agreement is set to enhance the competitiveness of labour-intensive sectors — such as textiles, leather, tea, coffee, spices, toys, gems and jewellery, and marine products — compared to least developed countries such as Bangladesh. Both sides described the deal as forward-looking and mutually beneficial. “Today, India has concluded the largest Free Trade Agreement in its history so far. Today is the 27th, and it’s a happy coincidence that on this very day, India is signing this FTA with the 27 countries of the European Union,” Prime Minister Narendra Modi said. Visiting European Commission President Ursula von der Leyen on Tuesday said: “Europe and India are making history today. We have concluded the mother of all deals.” Speaking at a press conference, Union commerce minister Piyush Goyal called the pact a “robust partnership framework” that leaves “sensitive issues aside” to provide a “balanced, equitable, and fair” FTA. He noted the deal is a “win-win for all sections of the industry” on both sides, with India gaining “significant access” to labour-intensive sectors and European industries gaining entry into India’s “large and fastest growing” economy in hi-tech areas.“This agreement covers almost 99% of the total exports that are sent from India to the European Union and about 97%-plus of the total exports from the European Union to India,” Goyal said, adding that this reflects the “strength and depth” of the agreement. Collectively, the EU imports goods worth $6.5 trillion and nearly $3 trillion worth of services. India’s total exports to the region currently stand at 1.5% for goods and 2.5% for services, indicating massive potential for growth.Under the FTA, nearly 94% of tariff lines for Indian marine products will receive duty-free access. Other sectors benefiting from zero-duty access include apparel, furnishing, home décor, sports goods, railway components, leather, and footwear.According to an EU statement, the FTA provides for a significant reduction of tariffs on agrifood products in India that currently average 36% and are as high as 150%. Tariffs on wine will be reduced from 150% to 20% for the premium range and 30% for the medium range. Duties on beer will drop from 110% to 50%, while tariffs on olive oil and other vegetable oils—currently up to 45%—and processed foods like chocolates and biscuits will be eliminated.Both sides agreed to exclude the most sensitive agricultural products from liberalisation. The EU will maintain current tariffs on beef, sugar, rice, poultry, milk powder, honey, bananas, soft wheat, garlic, and ethanol. It will, however, open calibrated quotas for sheep and goat meat, sweetcorn, grapes, and rum.Similarly, India safeguarded its sensitive sectors, including dairy, cereals, poultry, and soymeal.Commerce secretary Rajesh Agrawal allayed apprehensions regarding the EU’s Carbon Border Adjustment Mechanism (CBAM), or the so-called carbon tax. “As you are aware, CBAM is a horizontal regulation. It is applicable to all partner countries across the globe,” he said.Agrawal explained that a technical dialogue has been established to address market access for Indian industries despite CBAM. “We’ll be working together to see that the verifiers for CBAM in India are also accredited by the EU agency. We will also be working together to see and understand the technical processes through which this carbon CBAM measurement will be done, [in] both the economies,” he said.An expert group will ensure that any future Indian carbon trading system is plugged into the EU’s CBAM regulation. Agrawal added that the EU has committed to extending any flexibility granted to other partner countries to India automatically.HT on January 21 reported that India and the EU would adopt a middle path to resolve the carbon tax issue. The EU’s domestic Emissions Trading System (ETS) requires polluters to pay for emissions and cannot be waived for FTA partners. One solution involves aligning measuring methodologies, as India already has the Carbon Credit Trading Scheme (CCTS) for energy-intensive sectors like steel and cement. This could offset costs under Article IX of the EU CBAM Regulation, which allows offsets for carbon prices paid in the country of origin.Officials expect the FTA to be operationalised by the end of this calendar year, following legal scrubbing over the next five to six months. Key labour-intensive sectors—comprising more than $33 billion ( ₹2.87 Lakh crore) of exports currently subjected to duties between 4% and 26%—will enter the EU duty-free upon the pact’s enforcement.In return, India offered 92.1% of its tariff lines covering 97.5% of EU exports. While 49.6% of lines will see immediate duty elimination, others will be phased out over five, seven, and 10 years. Phased reductions and quotas will apply to products such as apples, pears, and peaches.“Imports of the 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