Federated Hermes: India-EU agreement provides a hedge against US trade uncertainty
Yasmin Chowdhury, Senior Investment Analyst for Global Emerging Market Equities at Federated Hermes, reacts to this week's India–European Union Free Trade Agreement:
'India and the EU concluded two decades of trade negotiations this week and announced a mega free-trade agreement that should lead to India’s export diversification and reduce its dependence on the US.
The mega deal will eliminate or reduce tariffs on almost all goods imported from India and the EU, and will strengthen cooperation on the defence front, unveiling a new security partnership. India’s labour-intensive industries are expected to gain significantly, with tariffs of up to 10% set to be removed on nearly $33bn worth of exports.
Sectors such as textiles, apparel, leather, footwear, marine products, gems and jewellery, handicrafts, engineering goods, autos should all see improved competitiveness in the European markets. Sensitive sectors in India were protected but India will allow unprecedented access to its tightly protected auto industry by agreeing to allow up to 250,000 European made vehicles to enter the country at preferential duty rates.
EU exports to India are expected to double by 2032 ranging from autos, industrial machinery to wine and pasta. The free trade agreement could take a year to come into force, delaying any up lift to GDP but it will lift much needed sentiment in the near term, providing a hedge against US trade uncertainty.'