India and the European Union (EU) are set to commence the 10th round of negotiations for the Broad-Based Trade and Investment Agreement (BTIA) in Brussels from March 10 to 14, as both parties aim to address key issues and finalize the long-awaited trade deal by year-end.
Negotiations, which began in 2007, have progressed slowly due to disagreements over market access, tariffs, regulatory standards, and sustainability commitments. However, recent high-level discussions, including European Commission President Ursula von der Leyen’s visit to New Delhi in February, have reinvigorated the process.
A report from the Global Trade Research Initiative (GTRI) highlights critical sticking points in various sectors, including agriculture, dairy, automobiles, wine, textiles, services, and investment protection. The EU is advocating for the removal of tariffs on over 95% of its exports to India, while India is contemplating opening approximately 90% of its market, according to the GTRI.
Agriculture remains a particularly contentious issue, with the EU seeking reduced duties on cheese and skimmed milk powder—products that India protects to support its dairy farmers. GTRI noted, “India’s dairy sector is highly sensitive, with millions of small farmers reliant on it. Lowering tariffs on EU dairy products could adversely affect domestic production.”
In the automobile sector, European manufacturers are pressing India to reduce import duties on fully built cars from the current 100-125% to around 10-20%. However, India is approaching this issue with caution. “The automobile sector significantly contributes to India’s manufacturing GDP and employment. Any drastic tariff reductions on European luxury cars could negatively impact domestic manufacturers,” stated Ajay Srivastava, founder of GTRI.
A possible compromise may involve allowing a limited number of European cars at lower tariffs, akin to India’s agreement with Japan.
Regarding textile exports, India is pushing for better access as its products currently face EU tariffs ranging from 12-16%. The report mentions that “removing tariffs on Indian textiles from day one of the agreement could significantly boost exports, enabling the labour-intensive industry to compete with Bangladesh and Vietnam.”
The services sector poses another challenge, as India seeks recognition as a data-secure country under the EU’s General Data Protection Regulation (GDPR) to facilitate digital trade, along with easier short-term business visas for its professionals. Conversely, the EU is demanding greater access to India’s banking, financial services, and legal sectors. The GTRI report highlights that “India encounters barriers such as high salary thresholds and local hiring requirements in the EU, which restrict the mobility of its IT professionals.”
Investment protection remains a contentious topic, with the EU seeking stronger safeguards for its investors. India, however, insists on maintaining its Model Bilateral Investment Treaty, which prioritizes regulatory autonomy. “India had terminated 22 investment treaties with EU nations earlier, citing concerns over excessive investor rights. Any new investment rules must balance protection with India’s policy space,” the report states.
Sustainability and labor issues further complicate negotiations, as the EU pushes for binding commitments on labor rights and environmental standards, while India favors a more flexible approach. Additionally, the EU’s Carbon Border Adjustment Mechanism (CBAM), which imposes extra tariffs on carbon-intensive imports like steel and aluminum, raises significant concerns for India. “Even if a trade deal is signed, CBAM could undermine the benefits for Indian exports. India must negotiate exemptions or compensatory measures,” according to the GTRI report.
The ninth round of negotiations took place in New Delhi from September 23-27, 2024, focusing on core trade aspects such as goods, services, investment, and government procurement.
Recognizing Mutual Benefits
Despite these challenges, both sides acknowledge the advantages of a trade agreement. Bilateral trade between India and the EU reached $190 billion in FY2024, making the EU India’s second-largest export market after the United States. The GTRI report highlights that “India stands to gain significantly in textiles, pharmaceuticals, and services, while the EU could expand its foothold in India’s automobile, financial, and technology sectors.”
Negotiations resumed in 2021 after a period of stagnation and were relaunched in 2022 with a broader scope that includes trade, investment protection, and geographical indications. “With both parties aiming to finalize the deal in 2025, the upcoming months will be critical in determining whether a breakthrough can be achieved after nearly two decades of discussions,” noted Srivastava.
India’s alcoholic beverage trade with the EU reveals a significant imbalance, particularly in wines. In 2024, India exported merely $1.5 million worth of wines to the EU, while imports amounted to $412.4 million. In spirits, India exported blended whiskeys, vodka, brandy, and liqueurs worth $64.9 million, compared to imports of $22.3 million, primarily consisting of brandy, gin, tequila, vodka, and liqueurs.
In FY2024, India’s key goods imports from the EU included machinery and computers valued at $12.9 billion, with turbojets accounting for $1.6 billion. Electronics imports reached $10.2 billion, driven by mobile phone parts worth $2.8 billion and integrated circuits (ICs) valued at $1.8 billion. Aircraft imports totaled $5.4 billion, while medical devices and scientific instruments were valued at $3.6 billion.
In FY2024, India’s primary goods exports to the EU were led by petroleum products, totaling $19.9 billion, with diesel exports contributing $12 billion and aviation turbine fuel (ATF) amounting to $6.8 billion. Electronics exports reached $8 billion, bolstered by smartphone shipments worth $4.3 billion.
The textile and garment sectors saw exports of $1.6 billion and $5.1 billion, respectively. Machinery and computer exports were valued at $5.2 billion, while organic chemicals contributed $5 billion. Iron and steel exports totaled $4.7 billion, and gems and jewelry shipments reached $3 billion. Pharmaceutical exports amounted to $2.9 billion, and auto parts exports were valued at $1.6 billion.
