Major Companies 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. Key sectors under discussion include textiles, marine products, sports and toys, and leather, all of which are labor-intensive and crucial for India’s export economy.
Textiles and Apparel: A Call for Competitive Edge
The textile and apparel sector is at the forefront of the push for tariff elimination. A Sakthivel, chairman of the Apparel Export Promotion Council, emphasized that securing zero-duty status would enable Indian manufacturers to compete more effectively with Bangladesh, which currently enjoys a significant advantage due to its zero-duty access to the EU market. Indian garments currently face an 11% duty in the EU, while Bangladeshi products enter duty-free. Sakthivel noted that a reduction in tariffs would not only increase orders from the 27 EU member countries but also benefit the entire value chain, from cotton production to fabric and yarn manufacturing. This change could significantly boost India’s apparel exports, enhancing the industry’s overall growth.
Leather and Footwear: Competing with Global Rivals
The leather and footwear sectors are also poised to gain from the FTA. Israr Ahmed, director of Farida Group, highlighted that tariff reductions would level the playing field with Vietnam, which has an existing FTA with the EU. This is particularly important as Indian exporters face competition from countries like Pakistan and Bangladesh, which already benefit from zero-duty access. Ramesh Juneja, chairman of the Council for Leather Exports, expressed optimism that exports to the EU could rise from the current $2.25 billion to $6 billion by 2030, should the FTA provide similar advantages. The anticipated tariff cuts are seen as a crucial step in bolstering India’s leather industry against international competitors.
Automotive Sector: Navigating Challenges and Opportunities
The automotive sector is another area of keen interest in the upcoming FTA discussions. Indian auto manufacturers are optimistic about their ability to compete with European counterparts but are wary of potential challenges posed by Chinese companies leveraging the trade pact to enter the Indian market with electric vehicles (EVs). To address these concerns, Indian industry players are advocating for protective measures or a transition period that would allow domestic manufacturers to strengthen their position and fulfill investment commitments. The focus is particularly on the internal combustion engine segment, where 90% of sales occur in the sub-Rs 25 lakh category. European manufacturers, too, face challenges in selling vehicles priced around Rs 15 lakh, as the on-road costs can reach approximately Rs 25 lakh. The FTA negotiations may follow a phased approach to tariff reductions, similar to the UK deal, which could impact the automotive landscape significantly.
Mobility and Professional Access: Easing Barriers
In addition to sector-specific discussions, the FTA is expected to facilitate mobility-related easing, which would enhance access for Indian professionals and businesses to European markets. This aspect of the agreement aims to foster greater collaboration and exchange between India and the EU, potentially leading to increased opportunities for Indian professionals in various fields. As the negotiations progress, stakeholders from multiple sectors are hopeful that the FTA will pave the way for a more integrated economic relationship between India and the European Union, ultimately benefiting both parties.
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