Labour-intensive Indian exports gain from EU deal

The conclusion of the India-European Union Free Trade Agreement (FTA) marked a significant boost for India’s labour-intensive export sectors, with tariffs on most Indian goods entering the EU reduced or cut to zero.

- TBG NETWORK

Finalised on Tuesday, the trade agreement is expected to come into force sometime next year and is designed to deliver gains to both economies, according to Kotak Institutional Equities Research.

Indian exporters stand out as the key beneficiaries.

Almost all labour-intensive exports, such as textiles, apparel, leather, seafood, plastics, gems and jewellery, will now enjoy zeroor reduced-tariff access to the EU market.

These sectors previously faced higher duties than other Indian exports.

Nearly 28 per cent of India’s exports to the EU in 2024-45 were of labour-intensive sectors, according to the Kotak report.

“Indian exporters will benefit from 0 per cent tariff on almost all exports to the EU, especially in labour-intensive sectors, while the EU’s access to India’s consumer market will entail greater competition in some of the domestic sectors. This deal also potentially places a medium to long-term hedge against US tariff policy and geopolitical uncertainties,” the report read.

Beyond immediate tariff relief, the agreement provides a medium-term opportunity for India to diversify export destinations.

With the EU representing a large and stable import market, the FTA may gradually offset potential headwinds from other major trading partners.