EU trade deal to narrow textile gap with Bangladesh, Pakistan: Jefferies
The deal is expected to provide a major boost to India’s textile and garment industry, which currently faces tariffs of up to 12% in the EU, compared to zero duties for rivals such as Pakistan, Bangladesh and Turkey. Similar benefits are expected for exports of chemicals, leather products and footwear.
The EU imports approximately $125 billion worth of textiles and clothing annually, making it one of the largest clothing and fabric markets in the world.
Jefferies analysts note that India enjoys privileged access to 97% of EU tariff lines, covering approximately 99.5% of trade value. As a result, around 91% of India’s exports to the EU will not face any import duties from the date of entry into force of the agreement. In response, India will gradually reduce tariffs on 97% of EU exports over a period of five to ten years, which will translate into tariff savings of more than US$4 billion for European exporters.
India’s competitiveness is likely to increase by 2027, with customs duties falling to zero in labour-intensive sectors such as textiles, footwear, gems and jewellery.
Earlier, Union Minister of Commerce and Industry Piyush Goyal had said about the FTA that the Indian textile industry is all set to benefit from the India-EU FTA along with exports and has the potential to grow very quickly from USD 7 billion to USD 30-40 billion.
He noted that this could create jobs for 6-7 million people in the labour-intensive sector. In the automotive sector, tariffs on cars imported from the EU to India will be reduced from 70-110% to 10% with an annual quota of 250 thousand units, the Jefferies report said.
“We see limited impact on listed Indian OEMs as most of European OEMs’ vehicles, barring some higher-priced models, are already manufactured in India or assembled from CKD kits, which attract only 16.5% import duty,” he said.
India’s annual trade in goods with the EU of ~US$140 billion exceeds its trade with China or the US. Exports to the EU are ~80% of exports to the US at ~US$75 billion annually (17% of India’s exports).
India-EU trade has largely stabilized except for an oil product surplus that India has seen since the 2022 Russia-Ukraine conflict. FTA negotiations were launched in 2007, and renewed momentum since 2022 eventually led to an agreement.
Procedural steps on both sides imply that the agreement could be implemented in 2027.
