India Aims for Quick Interim Trade Deal with European Union

As per news reports, the Indian government is pushing to speed up an early-harvest trade deal with the European Union, following demands from exporters to secure an initial agreement ahead of the full free trade pact. However, several sticking points remain, making it uncertain whether the deal will be finalised by the end of July, 202.

A key factor in India’s timing is the progress of trade negotiations between the US and EU. If those talks fall through, India may seek to replace some US exports to the European market. Officials are watching closely before making any final decision on the contours of the deal.

India-EU Trade 

The EU is India’s largest trading partner, contributing 12.2% of total trade in 2023. It is also the second-biggest destination for Indian exports after the US. For the EU, India ranked as its 9th-largest trading partner, accounting for 2.2% of total goods trade.

Negotiations are ongoing around tariff and non-tariff issues. India has requested a three-year exemption from the EU’s Carbon Border Adjustment Mechanism (CBAM) for its MSMEs. Meanwhile, the EU is seeking wider access for its cars, wines, and whisky in the Indian market.

As per the news reports, the CBAM, approved in 2023, will come into effect in January 2026 and apply to high-emission goods like steel and aluminium. Commerce Minister Piyush Goyal has raised concerns over such trade measures, which India says could raise export costs. India is also considering a retaliatory framework if such levies are implemented.

Read more: Trump Announces Tariff Letters to 12 Nations: Trade Talks with India in Progress!

Comparisons with UK Deal

India’s recent FTA with the UK included cuts on tariffs for whisky and high-end vehicles. The EU is pushing for more favourable terms than those given to the UK. At present, European cars face up to 125% duty in India, while alcohol imports are taxed at over 150%.

Conclusion

Talks are ongoing, but timelines remain uncertain. A final decision may hinge on global trade shifts and how other deals play out in the coming months.

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