Duty cuts on labour-intensive sectors, cars, wines likely part of India, EU FTA

New Delh: Import duty cuts on labour-intensive sectors such as textiles and footwear, as well as cars, and wines, are likely to be part of the free trade agreement between India and the 27-nation bloc European Union (EU), the conclusion of which is set to be announced on January 27 here, sources said.

They said the pact is also expected to include liberalisation of norms in several services sectors.

India has pushed for zero-duty access for its labour-intensive sectors such as textiles, leather, apparel, gems and jewellery, and handicrafts. This has been a key demand in all free trade agreements (FTAs), finalised by India, this is one of the key demands and has been met in each one of them, including with the UK, the UAE, and Australia.

On the other hand, the EU has been demanding duty reductions for its automobiles and alcoholic beverages including wines. India has granted quota-based tariff concessions in its trade pact with the UK in the automobiles sector. Wines are part of trade deals with Australia and New Zealand.

India has provided duty concessions to Australian wines in a phased manner over a period of 10 years.

In September last year, Commerce Secretary Rajesh Agarwal, who was then a special secretary, said the proposed trade pact with the EU will provide huge opportunities for the domestic auto industry to boost exports and forge new partnerships with leading automobile giants from the 27-nation bloc.

Under the India-UK trade pact, signed in May 2025, tariffs on automotive imports will be reduced from over 100 per cent to 10 per cent under quotas on both sides.

India has included adequate safeguards in the FTA with the UK to protect its sensitive sectors. In the automobile segment, the import duty will be reduced over a 10-15-year period.

India and the European Union are set to announce on January 27 the conclusion of negotiations and the finalisation of an FTA. The pact is nearing the finishing line after 18 years of negotiations. The talks started in 2007.

The EU's tariffs on Indian goods are about 3.8 per cent, but labour-intensive sectors attract about 10 per cent import duty. India's weighted average duty on EU goods is about 9.3 per cent, with particularly high duties on automobiles, parts (35.5 per cent), plastics (10.4 per cent), and chemicals and pharmaceuticals (9.9 per cent).

India imposes a duty of 100-125 per cent on alcoholic beverages.

Sensitive agriculture issues have been kept out of the deal. The EU has been protective of its beef, sugar and rice markets. India, on the other hand, has protected its farm and dairy sectors from competition, as the livelihoods of large numbers of small and marginal farmers depend on them.

In an FTA, two sides reduce or eliminate import duties on over 90 per cent of goods traded between them.

A trade deal also includes easing of norms to promote trade in services sectors such as telecommunications, transportation, accounting, and auditing.

Besides FTA, the two are also negotiating a pact in investment protection and Geographical Indications (GI). The India-EU FTA covers 24 chapters, including trade in goods, and services.

India's bilateral trade in goods with the EU was USD 136.53 billion in 2024-25 (exports worth USD 75.85 billion and imports worth USD 60.68 billion), making the EU India's largest goods trading partner. The services trade in 2024 was USD 83.10 billion.

India had a trade surplus of USD 15.17 billion in 2024-25.

The EU market accounts for about 17 per cent of India's total exports, and the bloc's exports to India constitute 9 per cent of its total overseas shipments.