India and the European Union (EU) concluded a Free Trade Agreement (FTA) earlier this week, after nearly two decades of talks during which both sides were seen blowing hot and cold. This was the eight such bilateral deals signed or finalised since the Narendra Modi 1.0 government took office.
The EU FTA was dubbed as the “Mother of All Trade Deals” with a market of 1.9 billion people to bear its imprint.
Commerce and Industry Minister Piyush Goyal, in an interview with Mukesh Jagota and KG Narendranath, says India has adequately protected its interests under the pact and asserted that, “there is nothing in the agreement that is of concern” to India or its people or businesses.
Amid reports of a Brussels plan to extend the Carbon Border Adjustment Mechanism or carbon tax to nearly all industries (this raises the spectrum of limiting the scope of the FTA), the minister said it “cannot bring any new regulation which will impair the benefits we have got under the FTA.”
He also allayed the fears about a perceived compromise on India’s intellectual property rights (IPR) laws. Amid conjectures that facilities in excess of what’s mandated under the WTO’s Trade-related Intellectual Property Rights Agreement (TRIPS) may have been offered to the 27-member Union, home of some of the world’s largest drug companies, the minister said: “I can categorically tell you that there is no TRIPS- plus obligation on us.”
Excerpts:
Will 2026 be a year of trade pacts with the big one concluded with the EU and many others in the pipeline?
India today is preparing itself to become a developed and prosperous nation by 2047. Viksit Bharat is the collective commitment of 1.4 billion Indians.
And no nation in the world has become a developed country without engaging with the rest of the world. We have entered into eight FTAs under Prime Minister Narendra Modi, and all of these have been with developed countries. We are aiming to cover 37 developed countries. This will open up the doors to large amounts of investments and help create millions of jobs.
Would the next big trade agreement be with the US?
I think every human stands on its own feet. I have said this so many times. And we are very happy to have concluded the EU deal, eliminating duties on about 70.4% of tariff lines immediately (on Day One of the FTA), covering nearly 90.7% of India’s export value, while another 20.3% of products will see phased tariff elimination over time.
Overall, the EU’s tariff concessions cover almost 97% of tariff lines and more than 99% of trade value, making them highly ambitious which will deliver early and substantive gains.
All our life, haven’t you complained that Bangladesh sells so much textiles and garments to the EU, while we haven’t (lived up to potential)? Bangladesh has had the benefit of zero duty, because it’s a (least developed country.
Vietnam has a trade agreement with the EU that also provides zero duty access. We are paying up to 12% duty. With the FTA, the tariff will go away, allowing our exports to rise manifold.
How is this (EU FTA) different from the agreements signed earlier?
Earlier agreements like with Association of Southeast Asian Nations (ASEAN) and others were skewed in favour of the other party. They are with competitor economies. All FTAs that this government has signed are with developed economies and in each, we get market access for 99% of our goods at zero duties.
The EU FTA appears to be fair, though the finer details are awaited. But there are also a few areas of concern; the CBAM for instance could supersede the benefits.
There is nothing in this FTA that is of concern. I can proudly and loudly tell you that. On CBAM, the treatment they (EU) will give to any other country in future, India will also get.
We may have got the most favoured nation (MFN) treatment, but this is not reassuring as the EU deal with the US covers areas of Washington’s interest (like limiting tariffs and a commitment on additional flexibilities), not necessarily relatable for India.
Whatever they give to any country we will also get. It’s impossible that we give a carve-out for someone, from a law or regulation to be framed in future. They will have to comply with our taxes. We cannot for instance give an exemption to anyone from Goods and Services Tax (under a trade pact).
Similarly, if they (EU) charge CBAM levy on their local manufacturers and on imports, (a carve-outs cannot be obtained). But they have agreed to give us credit for any taxes on carbon emissions that are charged in India.
The EU is reportedly contemplating an extension of the CO2 emission tax to nearly all industries and products. This is a serious threat to our FTA benefits…
There is already a clause in the FTA that they cannot violate any of our concessions. So if anything that they introduce hurts our ability to export then we will get into discussions to resolve that. They cannot bring any new regulation which will impair the benefits we have got under the FTA.
The EU says that the FTA is a big win for them as it provides for a high level of protection and enforcement of Intellectual Property rights (IPR). Will it lead to obligations in India that are beyond its commitment under the TRIPS agreement?
In the EU agreement, there is nothing which we are giving away on the IPR. Nothing at all. I can categorically tell you there is no TRIPS-plus obligation on us. And as for data exclusivity, we aren’t diluting the Indian law, which judiciously balances the interests of innovators and generic drug companies. I don’t think they ever talked about that.
The most litigious countries on IPR in the EU have been Switzerland and the UK. We have an IPR chapter and FTA in both (the FTAs with UK and EFTA also). So the EU was relatively easy (to negotiate with in this regard). India is known worldwide to have respect for IPR.
We have not infringed on anybody’s IPR. That has now got enshrined in the FTA also, but we are happy with it. We want more investments and seek to attract more innovation. Jobs are the priority. We have only the public safeguards (under IPR laws). All our existing laws continue as it is (despite the FTAs).
What is the rationale behind a separate quota for Electric Vehicles (EVs) in the FTA?
The concessional duty for EVs will start after five years. We will gradually give concessions on a very small quota of 90,000 units. It (the opening up) should not hurt our domestic manufacturing given the size of our auto industry.
In fact, they don’t even want a higher quota except for the high- end cars, as they don’t make low-cost cars. They are looking to test-market their models. Once they find there is traction on any model, they will want to invest and set up manufacturing bases in India. We make the best auto components at the best value. India today is a net exporter of cars.
What is the biggest strategic win for India in the FTA with the EU?
India has earned its place on the high table. Today the world is seeing India as an important player. The world recognises that India is the fastest growing large economy. We have political stability, young talent and skill, and manpower which can do the best of work.
We are also moving into innovation and research and modern technologies, adopting them very fast. Under Prime Minister Modi’s leadership, India is becoming a developed and prosperous nation, maybe a $ 30-35 trillion dollar economy. And the whole world today wants to improve, expand and engage with India in a much bigger way.
You have earlier talked about Indian industry often missing the big picture. Even the Economic Survey has echoed your view saying that big companies should get out of the negotiated shelter business. So, now that we are signing so many FTAs how do you see the industry responding to it?
Industry is excited. (Tata Sons Chairman) N Chandrasekharan has said that there will be hundreds of new factories coming up in India.
We are working both from the Department of Commerce and through all the industry associations across the country, including the smaller ones, to see how we can expand the knowledge about the benefits of these FTAs and the willingness to export more, and willingness to engage with the world market.
The focus is on quality, sustainability and on meeting international standards. We need to create large scale factories so that economies of scale make us more competitive in the world. Focus on getting investments and technology from other parts of the world will enable India to manufacture in India for India and for the rest of the world.
We have talent, skill, youthful demography and labour. We have all the advantages which most of the countries today don’t have.
Canada has shown willingness to speed up negotiations on the FTA with India. Would you be visiting Canada next month?
We will decide that over the next few days. I received a message yesterday from my (Canada) counterpart. They are very keen to speed up the negotiations. So we will talk to them and see what we can do.
Review of the goods trade agreement with Asean was to be completed by 2025. How has this progressed?
It is at an advanced stage, but not yet completed.
What are the timelines for conclusion of FTAs with Chile and Peru?
Probably, the Chile pact will get finalised before the one with Peru. The FTA with both countries will secure supplies of critical minerals, which we need in large quantities. Prime Minister Narendra Modi’s strategy is very calibrated, smart, and forward-looking. This (more FTAs) is basically India preparing itself and making itself future-ready.
When will the Comprehensive Economic and Trade Agreement (CETA) with the UK become operational?
We have finalised the Double Contribution Convention that will address the issue of social security contributions of temporary workers under the UK pact. Things will move very quickly, and in the next few months, we should be able to operationalise the CETA.
When can we see the FTA with the EU be formally signed?
It will take a few months, given the legal scrubbing to be completed. Then the EU has to translate it into 24 languages for all the member states.
But I think in the calendar year 2026, we should be able to operationalise the FTA.
How do you respond to the United States’ comments on the India-EU FTA that New Delhi has “come on top of it”?
I think every country is entitled to its views. I believe it’s a fantastic agreement in the interest of the EU countries and India. Everybody stands to gain, nobody gets hurt.
On the services part of the FTA, there is a predictable framework. But do you have any specific numbers on the student visas or worker visas?
On student visas, there is no cap. And everybody who goes to study in Europe and India will get a 9-month work visa. That has been brought into the FTA. The EU countries need people (for employment), but the exact numbers are for each country to decide.
They have created a framework, and the mobility agreement is being finalised with each country separately. That process the Ministry of External Affairs (MEA) is already doing. We have done it with many countries like Germany. And we will continue to pursue it.
China may again try to push the Investment Facilitation for Development Agreement at the WTO at the Cameroon WTO Ministerial Conference in March as a prelateral agreement. Do we remain opposed to it?
China is pushing it as a part of the Belt and Road Initiative. Everybody pushes a lot of agendas. We also push a lot of agendas. But unless there is consensus, nothing can be finalised at the WTO.
A shift towards plurilateralism may not be in India’s interest…
Not necessarily. India is also evolving. It’s coming out of a lot of the past thinking. With an open mind, we look at every issue. Today India negotiates from a position of strength with self-confidence. And we look at every item on its own merits and find out if it is beneficial for India.
You have talked about being a champion of startups and have said now domestic capital needs to come into Indian startups in a big way. But they are asking for incentives and simpler procedures.
I think the government has done a lot for startups. We continue to remain committed to supporting them, as we see in them the future of India. We see India today as the world’s third largest startup ecosystem, providing jobs to tens of thousands of people. Converting our young men and women from job seekers to job creators is the goal.
What has been the progress on the second Fund of Funds for startups announced in the previous budget?
I think the paperwork is going on. We have finalised the broad contours. It is making good progress.
Expectations from the 14th Ministerial Meeting of the WTO in March?
We always go with an optimistic open mind. And we look at what is on the table. And try to come up with some consensus on as many issues as we can.
How have exports been in January?
Positive, so far.