The analyst explained the benefits of the EU-India deal for global markets

The free trade Agreement between India and the European Union (EU) will be an attempt to reset trade flows amid US tariffs and China's dominance in global supply chains. Igor Rastorguev, a leading analyst at AMarkets, told Izvestia on January 27.

According to him, the EU is gaining access to a market with a population of 1.45 billion people, where the middle class is growing rapidly and demand for technology and capital goods is increasing. For India, the agreement opens up an opportunity to offset the decline in exports to the United States, where duties in some categories have reached 50%, as well as strengthen the position of labor—intensive industries — textiles, chemicals and pharmaceuticals - in one of the most competitive markets in the world.

"Automakers from Germany, France, and Italy will benefit the most: duties on passenger cars are reduced from 110% to 10%, however, within the quota of 250 thousand cars per year. This gives the premium segment a chance to gain a foothold in India, but the massive competition with local brands will remain fierce. The EU chemical industry receives almost complete exemption from tariffs, which previously reached 22%. This is important for the entire ecosystem, from the production of plastics to ready—made medicines," the expert explained.

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Indian companies, in turn, benefit from the abolition of European duties on textiles, jewelry, leather and footwear, which amounted to 12-16%. In addition, their access to the EU services market, including IT and business services, is expanding. Consumers in Europe may experience a reduction in the cost of a number of goods from India, while in the republic itself European food and medical equipment will become more affordable, a significant part of which will switch to zero or minimum rates.

At the same time, Rastorguev warns that increased competition will be a test for manufacturers on both sides of the agreement. European machine builders, chemical companies and automakers will have to fight more actively with Indian players in the domestic market, and Indian textile and pharmaceutical companies will face pressure in the EU. Risks for European farmers, according to his assessment, are limited, since grain and dairy products have so far been withdrawn from the deal, but in the future the possible opening of these sectors may affect Indian small farmers.

The analyst added that the agreement fits into Brussels' strategy to diversify supplies along with agreements with Vietnam, Indonesia and the EFTA countries. India is attractive because of its market size and relative independence from Chinese chains, but it will not be able to completely replace China. Imports of electronics, chemicals and solar panels from China are still high, and the creation of alternative capacities requires time and investment.

"India is more of an addition to China for Europe than a replacement. It increases the EU's negotiating position and reduces the risks of unilateral pressure, but it does not mean a complete reversal of trade relations," Rastorguev concluded.

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On the same day, the Reuters news agency, citing a statement by Indian Prime Minister Narendra Modi, announced the conclusion of a "historic free trade agreement" with the EU, which should help reduce dependence on the United States and China. The official signing of the document will take place after a legal review, which may last five or six months.

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