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India and EU reach partial trade deal consensus, exclude dairy and rice amid political sensitivities

Brussels and New Delhi agree on nearly half the deal’s chapters as they target a December signing; EU frustrated by limits on auto and alcohol market access.

   
June 3, 2025, 08:08
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NEW DELHI / BRUSSELS (Realist English). India and the European Union have reached agreement on nearly half of the chapters in a long-anticipated trade agreement, according to people familiar with the negotiations. The pact, which both sides hope to finalise by the end of 2025, will notably exclude “sensitive” agricultural sectors — particularly dairy and rice — in a move aimed at protecting Indian farmers.

So far, eight out of approximately twenty negotiating chapters — covering areas like customs, trade facilitation, rules of origin, and intellectual property — have been settled, following momentum gained in recent negotiation rounds in New Delhi and Brussels.

“The expectation is that we will close a deal in December,” said an Indian official involved in the talks. “Good progress has been made thanks to the momentum that has picked up in the last two rounds.”

Indian Prime Minister Narendra Modi and European Commission President Ursula von der Leyen reaffirmed their commitment to the deal during a February meeting in New Delhi. Indian Commerce Minister Piyush Goyal and EU Trade Commissioner Maroš Šefčovič held additional talks in Paris on Monday. A 12th round of negotiations is scheduled for early July.

While the latest breakthroughs involve less controversial issues, major sticking points remain. The EU has expressed frustration over limited access to India’s markets for automobiles and alcoholic beverages — key export interests for Brussels. Indian officials, in turn, have defended their high agricultural tariffs as a matter of political necessity.

“Dairy overall is a no-go area,” said a senior European negotiator. “We’ve defined a perimeter for what meaningful free trade looks like — and milk is not part of it.”

India, the world’s largest milk producer, generates over 211 million tonnes annually, with production driven by more than 15 million small-scale farmers. Domestic stakeholders, such as Rupinder Singh Sodhi, president of the Indian Dairy Association, maintain that “India does not need dairy from outside.” Import duties on dairy currently range from 30% to 60%.

Agricultural protectionism has been a longstanding feature of Indian trade policy since independence in 1947, and Modi’s government remains wary of rural unrest after large-scale farmer protests in recent years.

Rice — another politically sensitive crop — has also been excluded from the negotiations, sources confirmed.

In contrast, India’s recent deal with the UK included concessions on spirits, cars, textiles, and machinery, while similarly leaving dairy mostly off the table. EU negotiators are pushing for what they call “economically meaningful market access” in these remaining sectors.

Another major point of contention is the EU’s Carbon Border Adjustment Mechanism (CBAM), which is due to be implemented next year. The scheme will place carbon tariffs on imports of emissions-intensive goods like steel, cement, and chemicals. Indian officials warn that the measure could disproportionately hurt India’s heavy industry.

“CBAM would have an adverse effect on trade,” said one official in New Delhi. “India is looking at all options, including pushing for its deferment.”

The India–EU trade pact, if concluded, would mark a significant geopolitical and economic milestone, offering both parties a hedge against growing uncertainty in U.S. trade policy under President Donald Trump. However, the exclusions and friction over environmental tariffs signal the deep challenges ahead in bridging economic priorities with political realities. Whether this “partial consensus” can become a durable agreement will depend on whether both sides can reconcile ambition with pragmatism.

AsiaEU Foreign PolicyEU-India RelationsIndiaInternational Trade
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