Brussels’ insistence on preferential market access to India’s fast-growing, $132 billion dairy sector could jeopradise progress on its proposed free trade agreement (FTA) with India, commerce and industry minister Piyush Goyal said on Friday.
Stating that India had sensitivities about the sector, which provides livelihood to millions of people, the minister said: “I just can’t open up dairy (sector), if the EU insists on it, then there (will be) no FTA.”
The minister added that if a trade deal could be concluded swiftly, only if sensitivities of each are respected by both sides.
He was speaking at the 18th Asia Pacific Conference of German Business (APK) here, which was attended by visiting German Chancellor Olaf Scholz. The German leader had said earlier at the function that if both sides work together, the India-EU FTA could be sealed “in months rather than years.” “My government is pursuing swift progress and rapid conclusions (of the FTA terms) ,” he said.
India dairy market was valued at $131.5 billion Billion in 2024, and is seen to reach $291 billion by 2033, at a CAGR of a little over 8%..
India’s sensitivities stem from the vast difference with the per capita incomes and development levels between the countries of the 27-member economic bloc. Dairy sector is one such area where India has reduced market access in the FTAs negotiated in the past too.
In the Australia-India Economic Cooperation and Trade Agreement (ECTA) signed in 2022, FTA signed with four-nation European Free Trade Association in March this year and the Comprehensive Economic Cooperation Agreement (CEPA) the dairy sector was kept out. Australia and ECTA’s trade agreements with India are the only ones that they have signed which does not include trade on concessional terms in the dairy sector, Goyal said at the 18th Asia Pacific Conference of German Business (APK) here.
Despite India being the largest producer of milk since 1998, the dairy is a sensitive sector as much of it depends on small farmers owning a few milch animals and cannot compete with big dairy companies who source milk from farmers with an average herd size of 8,000 to 10,000 animals.
To protect its daily industry India imposes import duties of up to 68% and over that there are strict compliance requirements which effectively make these imports unviable. The government has maintained strict controls on dairy product imports such as skimmed milk powder (SMP) and fat and has not allowed any imports since 2011–12
“You (EU) are 27 countries, who have different priorities; India has 27 states. I may be growing apples in one state which does not permit me to open apples. If we respect (these) things, the FTA can be done very honourably, admirably, and fast,” Goyal added.
On EU’s initiatives like Carbon Border Adjustment Mechanism (CBAM), Deforestation Regulations which directly impinge on trade flows by imposing tough carbon emission standards, the minister said that there are extraneous issues that are best addressed by international bodies and agreements that are already in place. “We should focus our energies on trade and promoting investments and deeper strategic partnerships and doing it with speed.”
It (the FTA talks) will have to be a political decision and the negotiations cannot be left to the bureaucracy alone, the minister said.
In June 2022, India and the EU resumed the negotiations on the FTA after a gap of over eight years. So far nine rounds of negotiations have been held on the agreement.
Scholz arrived in Delhi late on Thursday as part of his three-day official visit to India. Later he co-chaired the seventh Intergovernmental Consultations (IGC) along with Prime Minister Narendra Modi.
He also said that recently the German government has agreed on a strategy to attract skilled Indian employees to Germany. “Today Indians are the largest group of foreign students at our universities. Last year alone, the number of Indians working in Germany grew by 23,000. That talent is a welcome addition to our labour market,” Scholz said.
He added that Germany is digitising its visa process, speeding up procedures and making them more user-friendly. At the meeting both sides also signed a Joint Declaration of Intent in the field of employment and Labour.
Germany is a key trading partner of India in the EU bloc. In 2023-24, India’s exports to Germany stood at $10 billion, while imports were $ 16.7 billion. Germany.is the ninth biggest source of FDI for India. In 2023-24 FDI from Germany was $ 505 million. Between April 2000 and June 2024, the total FDI from Germany stood at $ 14.74 billion
