India and the European Union concluded a long-awaited trade agreement, boosting prospects for Indian exporters while reshaping the competitive landscape for local manufacturers.
Indian makers of apparel and those in the gems and jewelry sector are set to benefit from the trade deal which will slash duties on these items in the EU to zero. Local food product firms will get preferential access to the EU market. Indian automakers and liquor companies, however, are likely to take a hit from the deal as it lowers import levies for European firms.
The trade pact, announced after nearly two decades of negotiations, will cut duties on 99.5% of goods exported to the EU from India, including seafood and footwear. Meanwhile, India has reduced or eliminated tariffs on 96.6% of items imported from the bloc, including cutting duties for European carmakers.
India’s most ambitious trade pact to date will alter supply chains, pricing power and growth prospects across sectors. “Textiles, gems and jewelry, leather, pharma, and high-tech engineering” will benefit from the deal, said Munjal Almoula, managing partner for Tax & Regulatory Advisory at BDO India.
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As companies await further details, here’s who will likely to benefit and lose out from the “mother of all deals”:
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WINNERS
Apparel Makers
India got direct access to $263 billion of European textile market, with an immediate zero duty on textile imports, the Narendra Modi-led administration said in a post on X.
The agreement is “critical” to improve the competitiveness of Indian readymade garment exports to EU which is the world’s largest market for these items, CareEdge Ratings said in a note. India could “gradually increase” its market share to as much as 9% from 5% currently, with an incremental annual export opportunity of nearly $4.5 billion over the medium term, it said.
Textile exporters jumped, with KPR Mill Ltd. gaining 6%. Welspun Living Ltd. rose 4.3% and Kitex Garments Ltd. surged 9.1%.
Additionally, tariffs on leather and footwear have been slashed to 0% from 17% earlier, allowing India access to the $100 billion European market.
Gems and Jewelry
EU has given duty-free access to gems and jewelry exporters from India. This will help double bilateral trade between the two regions to 910 billion rupees ($9.9 billion) in the next three years, said Kirit Bhansali, chairman at the Gem & Jewellery Export Promotion Council.
“This timely pact will help Indian exporters salvage lost ground,” especially with exports to the US down by 44%, Bhansali said. The deal will also enhance industry margins, accelerate manufacturing and generate jobs, he added.
Food Products
Indian seafood exporters will get preferential access to exports including shrimp, frozen fish, and value-added seafood products. Shrimp exporter Avanti Feeds Ltd. rose 2.1% on Tuesday.
Local producers of food items such as tea, coffee, spices and grapes will also get preferential access to the EU market while safeguards have been retained to protect Indian farmers in poultry and dairy.
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LOSERS
Liquor
India cut tariffs on European wine to as low as 20% and spirits to 40% from as high as 150% previously. It also cut duties on beer to 50% from 110% earlier.
This will expand the reach of European alcohol manufacturers including Budweiser-maker AB InBev, Heineken NV, Carlsberg and Remy Cointreau SA.
It’s a “negative” for Indian liquormakers, as competitive intensity is expected to increase, especially in the fast-growing premium and luxury segment, said Karan Taurani of Elara Securities. Growth of local spirit makers such as Radico Khaitan Ltd. will be hurt, he said. Radico’s shares slipped on Tuesday.
Indian winemaker Sula Vineyards Ltd. fell 3.5% after the deal announcement while United Breweries Ltd., which makes popular Indian beer Kingfisher, fell 1.2%.
Indian Carmakers
The pact will gradually allow up to 250,000 European-made vehicles to enter India at preferential duty rates, with tariffs gradually falling from 110% to as low as 10%. Levies on car parts will also be abolished after five to 10 years.
Shares of local carmaker Mahindra & Mahindra Ltd. dropped 4.2%, while that of Tata Motors Passenger Vehicles Ltd. slipped as much as 1.1%.