India-EU FTA: Export Boost for Textiles, Leather, but High Compliance Costs Loom

• The India-EU FTA could significantly boost exports of textiles, leather, and marine products, placing Indian firms on par with competitors like Bangladesh and Vietnam.
• While long-term potential for labor-intensive industries is strong, near-term gains are at least a year away due to implementation time and weak global demand.
• The EU market demands stringent compliance with ESG factors, traceability, and certifications, leading to high compliance costs for Indian exporters.
• Gains from the FTA are expected to disproportionately benefit companies already established in Europe, such as Gokaldas Exports and KPR Mill.
• The EU's Carbon Border Adjustment Mechanism (CBAM) poses a significant challenge, with potential 20-30% price impact on steel and aluminum exports, and future expansion to other sectors.

Why It Matters: India-EU FTA offers export opportunities but demands high compliance, with CBAM posing a major cost challenge.