According to a recent EY report, the India–European Union Free Trade Agreement (FTA) stands as India’s most ambitious trade agreement to date. The agreement which entered into force on January 27 establishes two major economic powers to develop trade and investment and industrial partnerships throughout multiple essential industries.
The India-EU FTA according to EY provides an extensive system that delivers substantial tariff reductions and matches up with extended operational advantages. The agreement will create strong effects on multiple industries including automobiles and defence and aerospace and textiles and information technology while driving innovation and competitiveness forward.
The FTA establishes a gradual reduction schedule which will lower import duties on completely built units (CBUs) from approximately 110 percent to almost 10 percent through an annual vehicle limit of 250000 units. The Indian market will become more competitive because of this development which will provide consumers with additional options and result in potential price decreases. European and Japanese and Korean manufacturers will maintain their local assembly and manufacturing operations in India because the duties on completely knocked down (CKD) units will decrease to about 15 percent which will generate employment opportunities and bolster domestic production.
The agreement establishes a Security and Defence Partnership framework which strengthens defence and aerospace cooperation between the two parties. According to EY the initiative will enable Indian and European companies to work together more effectively while companies will gain better access to shared technology and they will establish connected supply networks. EU aerospace exports will become more competitive through lower tariffs which will also assist Indian companies that operate through international partnerships and foreign direct investment.
The FTA grants the textile sector zero-duty access to the EU market from the first day of the agreement. The removal of the Generalized System of Preferences enables India to regain its market position while Indian textiles can now enter Europe at reduced prices. The IT and professional services sectors will benefit from simplified processes which allow skilled workers to enter the country and the establishment of social security agreements will provide new business opportunities especially in artificial intelligence and other developing fields. The India-EU FTA represents a significant achievement for India’s international trade policy because both parties involved have declared it to be the “mother of all deals.”
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