After almost two decades of negotiations, the Free Trade Agreement (FTA) between India and the European Union has been finalized. Although it will take some time to be fully implemented and it is expected that it will come into effect from next year, but the benefits of this deal have already started being discussed. Once the FTA is implemented, tariffs on about 97 percent of Indian products exported to Europe will be eliminated, leading to annual custom duty savings of about $4 billion in trade with the EU. Also, many products imported from Europe will become much cheaper for Indian consumers. The biggest impact of this agreement will be seen on the food and beverage sector. Currently, there is a 30 to 50 percent tariff on chocolate, cheese, pasta and other food products imported from Europe, which can be gradually reduced to zero after FTA. With this, these products will be available in the Indian market at very low prices.
What will be cheaper in India?
Products Current tariff rates (in percent) Future tariff rates (in percent) Aircraft and spacecraft 11 0 Machinery and electrical equipment 44 0 Eyeglasses, medical and surgical articles 27.5 0 Chemicals 22 0 Plastics 16.5 0 Motor vehicles 110 10 Quota up to (250K) Iron and steel 22 0 Medicines 11 0 Beer 110 50 Wine 150
20 (Premium Range)
30 (medium range)
Olive Oil and Vegetable Oil 45
0
Fruit Juice and Non-Alcoholic Beer 55
0
Processed fruits (bread, pastries, pasta and chocolates and pet foods) 50
0
Big relief on beer and spirits
The prices of spirits and wine are also expected to drop significantly. Currently, European spirits and wines attract a hefty import duty of 100 to 150 percent. Post FTA, this tariff may come down in the range of 20 to 30 per cent, and further reduction is possible in some categories. This will directly benefit consumers, making premium wines and spirits more affordable.
Big changes will also be seen in the automobile sector. Currently, European cars in India attract 70 to 100 percent import duty, making luxury cars very expensive. Following the agreement, tariffs on expensive cars could be reduced by about 40 percent in the first phase, with further reductions possible later. This will make European cars like BMW, Mercedes and Audi comparatively cheaper in the Indian market.
Impact on agriculture and dairy sector
Agriculture and dairy sectors will also be affected. Prices of these items may come down due to reduction in import duty on olive oil, processed food and some dairy products from Europe. Indian farmers and agricultural exporters will also get better access to the European market, which will boost agricultural exports.
Overall, once the India-EU FTA is implemented, Indian consumers will benefit from lower prices on many everyday imported goods, while the larger European market will become more accessible to Indian industries and exporters. This is expected to bring relief in prices as well as strengthen investment, employment and trade.
