India and the European Union on Tuesday announced the conclusion of negotiations for a free trade agreement, described as 'mother of all deals', under which 93 per cent of Indian shipments will enjoy duty-free access to the 27-nation bloc, while import of luxury cars and wines from the EU will become less expensive. EU has becomes India's 22nd FTA partner.
The agreement has been announced at a time when India is facing steep 50 per cent tariffs by the US. The EU is also facing a threat of fresh tariffs by the Donald Trump-administration on the Greenland issue.
The deal, concluded after negotiations spanning over two decades, will create a market of about 2 billion people across the world's fourth-largest economy, India, and the second-largest economic bloc, the EU. Taken together, India and the EU account for 25 per cent of the global GDP and one-third (about USD 11 trillion) of the international trade (about USD 33 trillion).
After holding summit-level talks with the EU's top leaders, Ursula von der Leyen and Antonio Costa, Prime Minister Narendra Modi said India had concluded the biggest free trade agreement in its history with the European Union. "This is not just a trade agreement. This is a new blueprint for shared prosperity," PM Modi said.
Commerce and Industry Minister Piyush Goyal said the deal gives unprecedented market access for over 99 per cent of India's exports by value. “The pact is a strategic breakthrough in the country's global trade engagement, unlocking vast opportunities in the USD 20 trillion EU market for 1.4 billion people,” he added.
Once the agreement is implemented, except for auto and steel, almost all the Indian goods (over 93 per cent) from India will get zero-duty access in the European Union, and of the remaining over 6 per cent, Indian exporters will get tariff reduction and quota-based duty concessions (for goods like automobiles). The pact will be signed later this year and is likely to be implemented in early 2027.
The average tariffs of the EU on Indian goods are already low at around 3.8 per cent and will be reduced to 0.1 per cent under the deal.
However, in some sectors, the duties remain high. These are marine (0-26 per cent); chemicals (up to 12.8 per cent); plastics and rubber (up to 6.5 per cent); leather and footwear (up to 17 per cent); textiles, apparel and clothing (up to 12 per cent); gems and jewellery (up to 4 per cent); railway, aircraft, ships, boats (up to 7.7 per cent); furniture and light consumer goods (up to 10.5 per cent); toys (up to 4.7 per cent); and sports goods (up to 4.7 per cent). On all these, the EU will eliminate the duties for India.
On the other hand, the EU will get duty-free access for over 90 per cent of its goods over a 10-year period in India. India will remove duties on only 30 per cent of European goods on the first day of implementation of the pact.
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