India-EU FTA: After 18 years of long negotiations between India and the European Union (EU), the free trade deal was finally finalized on Tuesday. However, under this deal, India has not reduced tariffs on many products like dairy, rice, wheat, pulses, tea, genetically modified (GM) products and coffee. The Commerce Ministry gave this information on Wednesday. The ministry said that in the trade deal with the EU, many products like beef and poultry, fish and marine products, cheese, maize, fruits and vegetables, dry fruits, edible oils and tobacco have also been kept out of the scope of tariffs.

Why did India take this decision?

According to the ministry, these areas are directly related to the livelihood of small and marginal farmers, hence it is necessary to provide them security. An official said that till now India has kept its dairy sector out of the scope of exemption under tariff in any free trade agreement with any country and this will be protected in the future also. “We will continue to protect this sector,” the official said.

India and the European Union (EU) completed negotiations on FTA on Tuesday and it is likely to be signed and implemented this year. The Commerce Ministry said that the EU, a group of 27 European countries, has also kept some sensitive areas out of the scope of this agreement. It has kept products like meat and meat products, dairy products, honey, rice, sugar and tobacco under protection. Under the agreement, many Indian agricultural products will get duty concessions in the EU market, which is expected to boost India’s exports.

India will get preferential market access in about 87 percent duty categories of agricultural products like tea, coffee, spices and table grapes. Additionally, the EU will reduce the duty range on some marine products from the current zero to 26 percent, which is likely to increase exports of marine products. According to the ministry, the EU’s marine product import market is worth about Rs 4.67 lakh crore ($53.6 billion).

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India-EU Trade Deal: The Free Trade Deal between India and the European Union (EU) was approved on Tuesday. It was named Mother of all deals. This deal happened at a time when both sides were struggling with many geopolitical tensions like high tariffs imposed by America, weak supply chains and war between Russia and Ukraine. This was harming trade flow.

Under the FTA between India and EU, duty will be reduced on 99.5 percent of goods exported from India to EU, which includes seafood and footwear. In return, India will reduce or eliminate tariffs on 96.6 percent of goods imported from the EU, which includes European automakers and liquor.

Many things will become cheaper

Overall, under the India-EU trade deal, many types of products are going to become cheaper in India, which will benefit both consumers and the industry. For consumers, the agreement is expected to reduce prices of European cars, premium and mid-range wines, spirits, beer, olive oil, processed foods, fruits such as kiwi and pears, and meat products including sheep meat and sausages.

For industries, there will be a significant reduction in costs on imports of machinery, electrical equipment, medical devices, pharmaceuticals, chemicals, plastics, iron and steel, and aerospace components, which will help manufacturers, healthcare providers and the infrastructure sector reduce production costs and improve efficiency.

Challenge for liquor manufacturing companies

India has drastically reduced the tariff on European wine. Duty on wine has been reduced to 20 percent, on spirits to 40 percent (which was earlier up to 150 percent) and on beer to 50 percent. This is no less than a challenge for the liquor manufacturing companies in India, for whom competition in the market is now expected to become tougher.

“This is a negative thing for Indian brewers,” said Karan Taurani of Elara Securities. Shares of Sula Vineyards, United Breweries and Radico Khaitan fell after the announcement of reducing tariffs on European wine imports.

Competition is going to be tough for Indian automakers

Car manufacturing companies in India are also likely to suffer losses due to the free trade deal because under this agreement, the tariff on cars imported from Europe has been reduced from 110 percent to 10 percent. Under this, duty on auto components will also be abolished in 5-10 years.

It is obvious that after this deal, cars of foreign companies like Mercedes, BMW, Audi and Volkswagen will expand their presence in the Indian markets, but Indian automakers will have to face tough competition. After this news, shares of Mahindra & Mahindra and Tata Motors Passenger Vehicles fell.

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