Senior officials from India and the EU resumed the much-awaited negotiations for a proposed free trade agreement (FTA) here on Monday, after a gap of almost nine years. Both the sides are set to focus on the “deliverables” first during the course of the negotiations, before moving on to contentious matters, sources told FE.
Duty-free access to the EU market for labour-intensive industries, mainly textiles and garments, will be among India’s key demands.
The negotiations restart at a time when the US and the EU, India’s top markets that accounted for as much as 44% of the country’s merchandise exports in FY22, are staring at a recession. Any collapse in economic growth in these economies could, therefore, potentially put the brakes on the resurgence in India’s exports witnessed in FY22.
Before the negotiations began, commerce and industry minister Piyush Goyal met European Commission executive vice-president Valdis Dombrovskis on June 17 and “discussed ways to fast track negotiations”.
Formal negotiations between the two sides for the FTA were stuck over stark differences after 16 rounds of talks between 2007 and 2013. The EU insisted that India scrap or slash hefty import duties on sensitive products such as automobiles, alcoholic beverages and dairy products, and open up legal services. Similarly, India’s demand included greater access to the EU market for its skilled professionals, among others. However, both the sides have now decided to take the negotiations to their logical conclusion.
The EU, even after the Brexit, continued to be India’s largest export destination (as a bloc) in FY22, though it has lost some appeal. The country’s outbound shipments to the EU jumped 57% on year in FY22 to $65 billion, albeit on a contracted base. Similarly, its imports from the EU jumped 29.4% last fiscal to $51.4 billion.
In April, the EU and India decided to set up a trade and technology council to boost bilateral ties, as the bloc’s president Ursula von der Leyen met Prime Minister Narendra Modi here. This move underscored growing co-operation between New Delhi and Brussels, as the US is the only other country that has a technical agreement with the EU, along the lines of the one signed with India now. The council is aimed at providing political-level oversight of the entire spectrum of the India-EU ties and to ensure closer coordination.
India signed an FTA with the UAE in February, New Delhi’s first such pact with any economy in a decade, and sealed another trade deal with Australia in April. Currently, it is also negotiating FTAs with the UK and Canada. The Gulf Cooperation Council, too, has evinced to sign an FTA with India.
The negotiations are a part of India’s broader strategy to forge “fair and balanced” trade agreements with key economies and revamp existing pacts to boost trade. The move gained traction after India pulled out of the China-dominated RCEP in November 2019.