The proposed India-UE (ALE) free trade agreement should have a positive impact on the Indian sector of the transformation of agri and food. Indian exporters are faced with a plethora of challenges, despite imports from the EU of several considerable quantum elements from India. The most notable are non -pricing obstacles such as strict pesticide residues, maximum residue limits (MRL), health and phytosanitary standards, traceability, hygiene, etc. India as a commercial restriction. Other problems, such as the limited acceptance / recognition of Indian certification organizations, add to the cost and the burden of compliance affecting the overall competitiveness of exporters.
If it is well negotiated, an ALE could bring several gains upwards:
- Price / elimination reductions for exports: The lower or zero prices on foods processed from India entering the EU will improve price competitiveness. The proposed FTA could open new market opportunities in the EU for value -added food from India, which are currently suffering due to pricing and non -tariff barriers.
- Reduced costs for imported inputs: If under the FTA, the rates on the machines, the packaging materials and the inputs (where the EU have resistance) are lowered, the treatment costs of Indian companies can decrease. This could reduce the cost of compliance (for example, importing high specification packaging, refrigeration equipment).
- Diversification of exports and upgrading of the value chain: Indian processors could move more in premium or niche segments (organic, healthy foods, additives, functional foods) that have higher margins. This would help stimulate exports from the food processing sector. A better brand, geographic indications (GIS), traceability, sustainability references could become distinctive factors.
- Regulatory certainty and compliance and improved standards: If the FTA includes provisions for the recognition of Indian laboratories, control organizations, certification authorities, there will be more predictability on regulatory changes (for example, the limits of pesticide residues and hygiene standards) which will reduce the risk and cost of exporters. This will lead to the adoption of good manufacturing practices (GMP), the analysis of the risk of critical control and ISO certifications, increasing the quality of the industry.
- Scale, investment and technology transfer: The FTA can attract EU investments in the Indian food processing sectors (equipment, cold chain, packaging, research). Contreprises, manufacturing contracts, transfer of advanced technologies (for example in preservation, packaging and quality control) can become more viable.
- MPME employment and growth: The food processing sector is with a high intensity of labor. Improving export perspectives can stimulate the growth of processing units, especially in semi-urban and rural areas. MPMs can gain part of the export value chains if the regulatory charges and access costs are reduced.
So that the Indian food processing sector does not fully draw an ALE with the EU, several political, institutional and industry actions are crucial.
The FTA may need to include high provisions for the recognition / equivalence of Indian certification organizations, laboratories, traceability and regulatory systems, as well as the articulation of an implementation among the new standards to give exporters the upgrade time.
The harmonization of Indian regulations with international standards (Codex, International SPS of agreements) may be necessary. In addition, a mechanism must be put in place for an early warning on EU regulatory changes. More importantly, strengthening the capacity of regulatory authorities (Apeda, FSSAI) in India for tests and application must be the highest priority.
The government must continue to focus on investment in the cold chain, storage, packaging, transport to reduce deterioration and maintain quality. Public-private partnership models (PPP) can be encouraged to improve treatment infrastructure, especially in rural / semi-urban areas. Since a large segment of this sector belongs to MPMEs with limited formal training, more programs on awareness sessions on COPDs, food security training, development of export products, sustainability, environmental compliance, etc. would be necessary.
Encourage the development of high niche / margin segments such as organic food, health food, ethnic foods and ready dishes can help exploit the growing demand for these segments. Given the rich diversity of production, the GIS can be exploited and better marketed. The increase in funds to R&D, the innovation of products and packaging and activities towards post-harvest management will not only improve efficiency but will also make the sector on a global scale.
Although the FTA apparently has a lot of versions, it must be taken to ensure that the national industry is protected via safeguard mechanisms, if the overvoltage of imports threatens national processors. Insurance / exchange risks for exporters can be explored.
The implementation of institutional mechanisms within the ALE would be a decisive role in the management of trade disputes, SPS disagreements, non -tariff barrier problems. Clear rules of origin and customs facilitation would help reduce delays and avoid climbing costs.
This article is written by Soumyak Biswas, partner, food and agro-industry, consulting management, BDO India.
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