India-EU Free Trade Agreement Nears Completion Amid Non-Tariff Concerns

As India and the European Union finalize a Free Trade Agreement, non-tariff barriers like the Carbon Border Adjustment Mechanism remain a challenge for India. Key negotiation points include easing services exports and improving workforce mobility. The EU seeks greater access in financial services, spotlighting the trade's complexity.

India and the European Union are on the brink of finalizing a long-awaited Free Trade Agreement (FTA), but concerns linger for India, particularly regarding non-tariff barriers like the upcoming Carbon Border Adjustment Mechanism (CBAM), according to a report by Jefferies.

The report highlights India's apprehension over multiple non-tariff barriers impacting its exports to the EU, with CBAM posing a significant challenge due to its policy of equalizing the carbon cost of imported goods with domestically produced ones.

Jefferies explains that India is likely to push for easing services exports and enhancing visa access for its burgeoning workforce in technology and medical fields. Conversely, the EU may seek to penetrate India's financial and legal sectors, with services trade emerging as a critical discussion area in the FTA.

The negotiations, stalled since 2013, have gained traction since 2022, with both parties agreeing to bypass sensitive sectors such as agriculture. The annual India-EU goods trade is valued at approximately USD 130 billion, mirroring trade figures with the US and China. India holds a trade surplus due to increased petroleum and electronics exports post the Russia-Ukraine conflict.

Potential sectoral impacts identified include a positive outlook for the textiles industry, with the FTA potentially aligning Indian textile duties with regional competitors. The EU aims to lower tariffs on car exports to India, where high duties pose a barrier. Pharmaceuticals might experience a boost if compliance requirements ease further.

(With inputs from agencies.)