After clinching a free trade deal with the UK earlier this month, India is hoping to seal an early harvest trade agreement with the 27-member European Union by July, this year. The agreement is expected to lead to greater market opportunities for India’s labour-intensive sectors such as readymade garments, pharmaceuticals, engineering goods and electrical machinery, sources said.

“The India-EU early harvest deal will focus on core trade issues, primarily tariff cuts and market access, while the tricky issues around sustainability – including labour, environment and gender – are likely to be dealt with later in the second phase of the agreement,” a source tracking the matter told businessline.

The early pact will also include commitments in the areas of government procurement and intellectual property rights, in line with the FTA signed with the UK, but the nitty-gritties of it are yet to be hammered out, the source added.

Team to visit Brussels

India’s negotiating team for the India-EU free trade agreement (FTA) is in Brussels this week to build on the momentum generated by the eleventh round of negotiations that successfully concluded in Delhi on May 16.

“The EU is keen on steep duty cuts for items such as automobiles, alcohol, meat, poultry and medical devices. It also wants concessions in government procurement and IPR. The last mile issues are being sorted out. Hopefully the deal can be completed by July this year,” the source said.

India hopes that tariff cuts for labour intensive items, including readymade garments, will create a level playing field for its goods in the EU market where countries like Vietnam and Bangladesh enjoy an advantage as they are beneficiaries of the Generalised System of Preferences (GSP) scheme.

“India and the EU decided to try and quickly conclude an early harvest deal in the backdrop of the increased volatility in the global trading environment due to US President Donald Trump’s erratic tariff policies. Since both are doing significant trade with each other, the deal holds a lot of potential,” the source said.

The EU is India’s largest trading partner with bilateral trade at $137.41 billion in FY 2023-24. India is the EU’s 9th largest trading partner, accounting for 2.4 per cent of the bloc’s total trade in goods in 2024. 

CBAM concerns

New Delhi’s concerns around the EU’s Carbon Border Adjustment Mechanism (CBAM), which could lead to imposition of carbon taxes of an estimated 20-35 per cent on carbon intensive goods, including steel, aluminium, cement and fertilisers from next year, may not get fully addressed in the interim deal. 

“The UK did not address India’s concerns around CBAM in the bilateral FTA. The EU, too, does not seem to be inclined to do so,” an industry source said.

In June 2022, India and the 27-nation EU bloc resumed negotiations for a comprehensive free trade agreement, an investment protection agreement and a pact on geographical indications (GIs) after a gap of over eight years.

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Published on May 21, 2025