Key Sectors Target Zero-Duty Access to EU Markets
Ahead of the anticipated announcement of the India-European Union free trade agreement (FTA) on Tuesday, significant attention is focused on key sectors where Indian industries are advocating for zero-duty concessions. This move aims to enhance competitiveness against rivals like Bangladesh and Vietnam. Industries such as textiles, marine products, sports and toys, and leather are at the forefront of these requests, all of which are labor-intensive sectors that could benefit greatly from reduced tariffs.
Textiles and Apparel: A Push for Competitive Edge
The textile and apparel sector is particularly eager for tariff elimination, which currently imposes an 11% duty on Indian garments entering the EU. In contrast, products from Bangladesh enjoy zero-duty access. A Sakthivel, chairman of the Apparel Export Promotion Council, emphasized that securing zero-duty status would enable Indian manufacturers to compete more effectively within the EU market. He noted that this change could lead to increased orders from the 27 EU member countries, leveraging India’s advantage in raw materials. The anticipated boost in apparel exports is expected to positively impact the entire value chain, from cotton production to fabric and yarn manufacturing.
Leather and Footwear: Competing on a Global Scale
The leather and footwear industry is also poised to gain from the FTA, with industry leaders highlighting the competitive edge it would provide against countries like Vietnam, which already has a free trade agreement with the EU. Israr Ahmed, director of Farida Group, pointed out that tariff reductions would significantly enhance competitiveness, especially in light of existing US tariffs. Ramesh Juneja, chairman of the Council for Leather Exports, expressed optimism that the FTA could elevate India’s exports to the EU from the current $2.25 billion to an impressive $6 billion by 2030, aligning Indian products with those from Pakistan and Bangladesh that currently benefit from zero-duty access.
Automotive Sector: Navigating Challenges and Opportunities
The automotive sector is another critical area of focus, particularly as Indian and European negotiators have agreed to exclude agriculture from the trade discussions. Indian auto manufacturers are confident in their ability to manage costs and compete with European counterparts. However, there are concerns about Chinese companies potentially using the trade pact to introduce their electric vehicles (EVs) into the Indian market. To address this, Indian manufacturers are seeking protective measures or a transition period to allow domestic industries to mature and fulfill their investment commitments. This period would also enable Indian auto component manufacturers to integrate into the global value chain.
In the internal combustion engine segment, where 90% of sales occur in the sub-Rs 25 lakh category, there is a strong push for protection in the middle and smaller segments. European manufacturers face challenges in selling vehicles priced around Rs 15 lakh, with on-road costs nearing Rs 25 lakh. If the UK trade deal serves as a model, the Indian government may implement a phased reduction of tariffs, currently at 110%, alongside quotas. Notably, EVs, which were not included in the UK agreement, may receive a longer transition period to facilitate market entry.
Mobility and Market Access: Easing Barriers for Professionals
In addition to tariff discussions, the FTA is expected to include provisions that ease mobility for Indian professionals and businesspeople seeking access to European markets. This aspect of the agreement aims to foster greater collaboration and exchange between India and the EU, potentially leading to enhanced opportunities for Indian talent in Europe. As the FTA negotiations progress, stakeholders across various sectors remain hopeful that the agreement will pave the way for increased trade and economic growth, benefiting both regions in the long run.
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