India, EU to sign 'Mother of All Deals'... what will become cheaper, what will be benefits for India and Europe?
A major announcement regarding a Free Trade Agreement (FTA) between India and the European Union (EU) is expected soon. The European Union has described it as the "mother of all deals." European Commission President Ursula von der Leyen and European Council President Antonio Costa will hold discussions on this issue with Union Commerce Minister Piyush Goyal in New Delhi.
The aim of this agreement is to facilitate trade between India and the European Union. It will reduce trade barriers, benefit the MSME sector, open up each other's markets, and provide protection to products with GI tags. In simple terms, it will be a toll-free route for trade.
The FTA is expected to bring a qualitative change in deepening the overall bilateral ties in a range of sectors. The broad focus of today's meeting will be on trade, defence and security, climate change, critical technologies and strengthening the rules-based global order. A memorandum of understanding on facilitating the mobility of Indian workers to Europe is expected to be another key outcome of the summit.
EU is world's largest trading bloc
The EU is the world's largest trading bloc, and India is a rapidly growing major economy. Their collaboration will create a market of approximately 2 billion people, and this agreement will cover nearly 25% of the world's GDP. Today, the world wants to reduce its dependence on the US and China. In this context, this deal could make India a major manufacturing hub as an alternative to China. Last year, trade between India and the European Union was approximately Rs 12.5 lakh crore. This is expected to double after the FTA.
Benefits for India
Relief from Europe's carbon tax, benefiting the steel, aluminum, and hydrogen sectors.
European wines, cars, and industrial products may become cheaper in India.
The 10% duty on textiles, footwear, and leather products may be reduced or eliminated.
Countries like France and Germany may set up defense factories in India.
A major boost for the garment, leather, and footwear sectors.
Indian companies will gain access to European Union defense funds.
Trade in the pharmaceutical and chemical sectors could increase by 20-30% annually.
Benefits for Europe
Taxes on cars, currently at 110%, could be reduced to 40% and eventually to 10%
Lower taxes on European liquor and wine in India
Indian market becomes easier for companies like BMW, Mercedes, and Porsche
More opportunities in the IT, engineering, telecom, and business services sectors
Why was the deal stalled for 19 years?
Negotiations on the India-EU trade deal began in 2007 but stalled in 2013. The main reasons were the lack of agreement between the two sides on opening up the agriculture and dairy sectors, disagreements over reducing taxes on liquor and cars, and the EU wanting to eliminate 95% of tariffs, while India was only willing to go up to 90%.
Foreign car companies may introduce more models in India
India is the world's third-largest car market, but foreign companies currently have a market share of less than 4%. Lower taxes will allow companies to introduce more models and increase investment in India.
Which sectors will benefit the most?
Labor-intensive sectors such as textiles, gems and jewelry, footwear, leather, and handicrafts are expected to benefit significantly. India wants these products to have zero or low-tariff access to the European market.
Challenges for India
Potential challenges of this agreement include increased competition for domestic companies from foreign brands, higher costs due to the EU's strict environmental and labor regulations, potentially higher prices for some medicines due to stricter patent rules, and difficulty for small industries to compete with large European companies.