India to ramp up trade negotiations with key partners starting next week

New Delhi: India has firmed up an intensive trade negotiation schedule starting next week to finalize agreements with the European Union (EU), Australia and the Association of South-East Asian Nations (Asean), according to the commerce ministry.

While India and Australia are set to review their Comprehensive Economic Cooperation Agreement (CECA) from 19-22 August, the ninth round of free trade agreement (FTA) talks with the EU has been scheduled for 23-27 September. India will also hold the next round of FTA talks with Peru in September, and a trade agreement review with Asean from 19-22 November, a senior government official said.

However, the next round of FTA talks with the UK hasn’t been finalized yet, with India seeking an exemption from a British proposal for a tax on imports with a large carbon footprint. An FTA with Oman could be announced in the coming months as negotiations are almost complete.

FTAs are seen as vital for India amid a challenging global environment as they open new markets, boost exports and attract foreign investments, which fuel economic growth.

By reducing trade barriers, FTAs can enhance India’s global competitiveness, drive domestic reforms, diversify export markets, create jobs and strengthen strategic alliances. This makes them a crucial tool for India's economic and geopolitical strategy.

“FTAs are complex agreements covering a wide range of issues. Reaching a consensus on all aspects can be time-consuming and involve protracted negotiations," said Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO).

“Despite these challenges, both India and the EU recognize the potential benefits of an FTA and have shown a commitment to overcoming these obstacles," he added.

Carbon tax, pesticide levels dominate India-EU agenda

Important issues on India’s agenda with the EU include discussions on the Carbon Border Adjustment Mechanism (CBAM) or carbon tax, relaxing rules on the maximum amount of pesticide residue allowed in agricultural commodities, and eliminating tariff lines on most Indian products, including processed food and readymade garments, another official at the ministry said.

The EU on its part wants tariff cuts on most of its exports including automobiles, wines and spirits; stronger intellectual property protection; and higher sustainability and labour standards.

As for services, while the EU wants greater access to the Indian banking, insurance and e-commerce sectors, India is pushing for access for its IT and professional services.

Also read: India-EU trade mustn’t stumble on digital sovereignty

“The EU is advocating for stronger intellectual property protections, which India is cautious about due to concerns over generic medicines. Additionally, the EU is pressing for sustainability and labour standards in the agreement, but India is worried about their impact on its domestic regulations and industries," said trade analyst Ajay Srivastava, chief executive officer of Global Trade Research Initiative (GTRI), a think tank.

With Asean, India will review its tariff concessions granted to members of the group including Vietnam, which allows zero-tariff imports of mobile phone components.

India-UK FTA: Scotch whisky, EVs, services

Although India and the UK have made significant progress on their FTA talks, several challenges remain to be addressed. The UK is pushing for zero tariff on Scotch whisky, electric vehicles and chocolates, while India seeks duty-free access for its textiles and pharmaceuticals.

According to the first government official cited above, India will not offer zero duty on Scotch whisky, but is considering offering the Australian model of tariff structure to both the EU and the UK.

India has allowed tariffs on wine from Australia with a minimum import price of $5 a bottle to be reduced from 150% to 100% on the deal’s implementation, and to 50% over the next 10 years. The duty on bottles with a minimum import price of $15 has been reduced from 150% to 75% on the implementation of the deal, and to 25% over the next decade.

Also read: India weighs softening its stand on UK FTA, expects UK to reciprocate

In services, the UK wants India to open up its telecom, finance and legal sectors, while India is advocating for more work visas and mobility rights for its professionals. The UK has tentatively agreed to fixed-period visas but is hesitating on the number.

India has also requested an exemption from the ‘UK’s 2027 carbon border tax, a contentious issue that’s yet to be resolved. The two are also working on finalizing rules of origin and intellectual property rights.

India-Australia CECA: Non-tariff barriers

In its CECA with Australia, India is pushing to remove non-tariff barriers that hinder the export of agricultural products including grapes to the wine-making nation.

Nine formal rounds and inter-sessional meetings have already been held, with negotiations conducted on five tracks agreed to under the Economic Cooperation and Trade Agreement (ECTA), and 14 new areas including micro, small and medium businesses, innovation, agritech and critical minerals.

India has allowed access to Australian products covered under 70% of tariff lines, while Australia agreed to eliminate tariffs on all products from India. Australia wants tariff cuts from India on more products, while India is pushing for removal of non-tariff barriers that hinder the export of agricultural products such as okra, pomegranate and grapes in the review, experts said.

Also read: Australia pitches a tech-for-tariff agri deal with India

“Although Australia has agreed to zero tariffs on these products, non-tariff barriers prevent exports. Discussions are also ongoing about pharmaceutical pricing controls on generic medicines in Australia, which is a significant concern for India," GTRI’s Srivastava said.

“The rules of origin were not fully negotiated (at the time of signing the CECA), and both sides are now working on finalizing product-specific rules. There are also challenges related to investment and services, including mutual recognition agreements and market access for service sectors," he added.

A commerce ministry spokesperson did not respond to emailed queries. Comments from the UK and the EU are awaited.

India’s trade deficit

India’s overall trade remains in deficit, with export growth slowing due to decreased global demand amid falling commodity prices. The merchandise trade deficit—the difference between a country's goods exports and imports—widened to $23.5 billion in July, as exports fell and imports rose sequentially.

India’s merchandise exports stood at $437.06 billion in FY24, down from $451.07 billion in the previous fiscal. Goods imports fell to $677.24 billion in FY24 from $715.97 billion in FY23.