India-EU Trade Agreement: Implications for Dairy Sector Protection

India and the European Union are advancing towards a free trade agreement (FTA) that is poised to transform their trade relations. The agreement is expected to grant duty-free access to over 90% of Indian goods entering the EU market. However, it will include protective measures for sensitive sectors such as dairy and agriculture, which are crucial for India.

The FTA aims to be balanced and mutually beneficial, removing most tariff and non-tariff barriers while preserving safeguards for vulnerable products. For India, maintaining protections for its dairy sector is a priority due to its economic and political importance. Millions of smallholder farmers depend on this sector, and the government is likely to retain tariff barriers or quota safeguards against dairy imports.

The EU’s Generalised System of Preferences (GSP), which offers reduced duties to developing nations, has recently been deemed less relevant for Indian exporters. This is because the FTA's tariff concessions are anticipated to surpass the benefits previously provided by the GSP. The Federation of Indian Export Organisations (FIEO) has highlighted that the FTA will offer broader and more predictable market access.

Despite the EU's recent extension of the GSP suspension for three years, which affects only a small fraction of trade, agricultural items largely remain unaffected. Consequently, the immediate impact on India's agricultural exports is minimal.

In 2023, EU imports from India amounted to approximately €62.2 billion, with a significant portion having graduated out of the GSP framework. The proposed FTA is expected to initiate a structural shift in trade relations, replacing unilateral preferences with a comprehensive agreement, enhancing long-term market certainty.