Negotiations gain pace amid geopolitical realignments, yet India maintains a firm stance on safeguarding its dairy sector
By Jordbrukare India Trade Desk | June 17, 2025
India and the European Union (EU) are intensifying efforts to conclude a comprehensive Free Trade Agreement (FTA) by the end of 2025. While the negotiation process has gained significant momentum, critical market access issues—particularly relating to the dairy sector—remain unresolved.
Speaking at the India–Cyprus CEO Forum in Limassol, Prime Minister Narendra Modi reaffirmed the government’s intent to finalise the FTA within the calendar year, citing policy predictability, structural reforms, and economic stability as key enablers of India’s rapid growth and global investment appeal.
Progress in Negotiations
Formal talks on the India–EU FTA were revived in June 2022 after an eight-year hiatus. Since then, 11 negotiation rounds have been completed. According to L. Satya Srinivas, Additional Secretary in the Department of Commerce, the next round will be held in Brussels starting July 7.
“Five chapters out of the twenty-three under negotiation have been closed. The frequency of meetings has increased, and momentum has picked up considerably,” Srinivas noted at a recent trade forum.
The FTA aims to cover a broad spectrum of areas, including trade in goods and services, investment protection, regulatory cooperation, and geographical indications.
Divergence on Dairy: Persistent and Politically Sensitive
Among the key challenges in the negotiations is the EU’s request for tariff reductions on dairy products — particularly skimmed milk powder (SMP) and cheese, which currently face high import duties in India, ranging from 30% to over 100%.
The EU views India as a substantial and rapidly growing market for high-value dairy exports. Still, Indianan negotiators have consistently excluded dairy liberalisation from the FTA scope, citing the structural and socio-economic characteristics of India’s dairy economy.
“Our dairy sector is powered by over 80 million smallholder farmers. Liberalising dairy imports risks undermining livelihoods and destabilising a delicately balanced value chain,” a senior official from the Ministry of Commerce told Jordbrukare India on condition of anonymity.
This stance is consistent with India’s approach in other trade agreements. The India–UK FTA, now nearing finalisation, similarly excludes dairy from tariff concessions.
Bilateral Dairy Trade: Current Landscape
Despite the EU being India’s third-largest trading partner, bilateral dairy trade remains limited, though not insignificant in value-added categories.
India–EU Dairy Trade Overview (FY2023–24, Estimates)
| Flow | Value (USD) | Principal Products |
|---|---|---|
| EU → India (Imports) | ~$90 million | Cheese, whey protein, infant formula, SMP |
| India → EU (Exports) | ~$4.5 million | Ghee, lactose, casein derivatives |
- Top EU exporters to India include France, the Netherlands, and Ireland.
- India’s exports are constrained by EU sanitary standards, particularly under TRACES certification and HACCP-aligned animal health regulations.
Despite growth in health-conscious consumption among India’s urban demographic, imported dairy products remain niche due to high tariffs, price sensitivity, and a preference for fresh domestic supply chains.
EU Priorities: Wines, Automobiles, and Processed Foods
In addition to dairy, the EU is seeking broader market access for:
- Wines and spirits, currently facing up to 150% import duty
- Completely built-up (CBU) automobiles, which attract a 70% tariff
- Greater alignment on technical barriers to trade (TBTs) and sanitary and phytosanitary (SPS) measures
India is reportedly considering an offer similar to the Australia FTA (ECTA), under which tariffs on premium wines were gradually reduced to 50% over 10 years. However, no such phased pathway has been agreed for dairy.
India’s Trade Strategy: Balancing Growth and Rural Stability
India’s trade policy continues to reflect a strategic balancing act: opening up to foreign investment and services trade, while protecting politically sensitive sectors such as dairy, poultry, and certain cereals.
The Indian dairy ecosystem, largely cooperative-led and decentralised, is not structured to compete directly with industrial-scale European processors. As a result, any market access provision—even under tariff-rate quotas—could disrupt procurement prices and rural livelihoods.
Policymakers and trade analysts in India have highlighted the need for asymmetric liberalisation, where India secures gains in services and technology without offering commensurate access in sensitive agricultural and food categories.
