India and the European Union are fast-tracking efforts to sign a comprehensive Free Trade Agreement (FTA), replacing the earlier plan for an interim deal. However, a significant hurdle remains: India’s resistance to opening up its dairy sector to European exports.
Officials from both sides indicated that significant progress has been made across most of the 23 negotiation chapters. The deal is likely to be concluded by year-end, although a few “loose ends” remain—dairy being among the most contentious.
“India will not offer concessions in dairy under any FTA,” a senior official confirmed, highlighting the government's firm stance on protecting domestic milk producers.
🧀 EU Pushes for Dairy Access, India Resists
The EU is seeking lower import duties on key dairy products, particularly cheese and skimmed milk powder (SMP)—items that are heavily shielded by India’s current tariff structure. European dairy exporters see India’s large consumer base as an untapped opportunity, especially as Indian dairy demand continues to rise.
However, Indian policymakers argue that zero or reduced tariffs would severely impact millions of small and marginal dairy farmers, destabilising local milk prices and threatening the sustainability of domestic cooperatives, such as Amul and Nandini.
“India’s dairy sector is built on smallholder farmers. Opening it to subsidized European imports would be economically and socially disruptive,” industry experts have consistently maintained.
India had similarly excluded dairy from its trade deal with the UK, a move that now appears to set the precedent for its EU negotiations as well.
🌍 Climate & Trade: Carbon Regulations Also Under Scrutiny
In addition to dairy, carbon-related regulations by the EU—such as the Carbon Border Adjustment Mechanism (CBAM) and the Deforestation Regulation (DR)—have emerged as major discussion points. These climate-linked trade measures could directly impact Indian agri-food exports, including value-added dairy products, unless mutually acceptable standards are defined.
🚗🍷 Tariff Requests Across Multiple Sectors
While dairy is India’s red line, the EU is lobbying for tariff cuts in:
- Wine imports: currently facing 150% tariffs, the EU wants this reduced to 30–40%
- Luxury vehicle imports: currently taxed up to 70%, EU carmakers seek a 10–20% rate
- Cheese and SMP imports: EU aims to match Australia-like concessions
Meanwhile, India is asking for: - Zero duties on labour-intensive exports (textiles, leather, food processing)
- Greater access to the EU’s services market
“Every deal is a consensus. Each party must account for the other’s sensitivities,” said Laurent Saint-Martin, French Minister of Foreign Trade.
Saint-Martin expressed optimism that the FTA could be finalised “in the coming weeks or months,” calling it a symbol of trade cooperation in an increasingly protectionist world.
🔍 Investment & GI Talks in Parallel
Beyond the FTA, India and the EU are also negotiating:
- A Bilateral Investment Treaty (BIT)
- An agreement on Geographical Indications (GI) for products like cheese, wines, basmati rice, and more
However, these are likely to be concluded only after the FTA is finalised, officials said.