India EU Trade Deal: What Could Go Wrong With the Mother of All Deals
India-EU Trade Deal: behind the optimism lies a tougher reality. This piece looks past the headlines to assess the risks and the trade-offs.
Everybody is talking about the India EU Trade Deal. Media in New Delhi and Brussels has been filled with coverage of how both sides stand to benefit, and much of the commentary has focused on export growth, tariff reductions and geopolitical realignment. Yet beneath the headlines lies a more complex story: what might actually go wrong with this “mother of all deals”, how durable its gains will be, and how difficult its implementation may prove.
On Tuesday, 27 January, there was visible satisfaction in both New Delhi and Brussels as Indian Prime Minister Narendra Modi and European Commission President Ursula von der Leyen publicly announced the conclusion of negotiations on the India EU Trade Deal. Both leaders embraced the agreement, with the European Commission President among those describing it as the “mother of all deals.” While there is no question this is one of the most consequential trade pacts either side has concluded, the premise that it will smoothly deliver benefits obscures a suite of unresolved issues that could complicate its journey from announcement to implementation.
First, it is necessary to understand why the India EU Trade Deal matters. The European Union currently exports a substantial volume of goods to India, and the agreement envisages significant cuts or eliminations of tariffs on the majority of those exports. EU officials and analysts have suggested — based on the tariff reductions and improved market access set out in the deal’s outline — that EU exports to India could plausibly double by around 2032 compared with current levels. This projection underpins much of the optimism in European policy circles about the economic importance of the pact.
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The deal’s scale is further underscored by the size of the economies involved. The India EU Trade Deal brings together two of the world’s largest economies: the European Union, a federation of 27 member states that collectively constitute the world’s second‑largest economy, and India, recognised as the world’s fourth‑largest economy by nominal GDP in recent international estimates. India now trades more with the EU than with any single country or bloc, making the EU its biggest trading partner for goods. On the other hand, India remains only the ninth‑largest trading partner for the EU, whose trade links with the United States, China and the United Kingdom remain larger. Nonetheless, the scale and ambition of this pact mean it could deepen economic ties to an unprecedented extent for both sides.
What Could Go Wrong: The Long Road Ahead for the India EU Trade Deal
One obvious question about the India EU Trade Deal is how long it will take before the agreement is finalised and operational. It is important to recognise that this deal did not materialise spontaneously or solely in response to external pressures. While higher US tariffs under the Donald Trump administration have certainly contributed to the urgency of diversification in global trade partnerships, negotiations on this pact have been ongoing, with fits and starts, for about two decades before reaching this point.
A great source of delay in previous rounds of talks lay in opposing positions on market access for automobiles. The EU pressed for wider access to India’s car market, where import tariffs have long been among the highest in the world. Indian duties on fully built European cars reached as high as about 110 per cent, making them prohibitively expensive, and New Delhi was reluctant to reduce those tariffs without safeguards for its domestic automotive industry. For years, both sides struggled to find a mutually acceptable compromise.
Agricultural market access was another persistent sticking point. India has traditionally protected its farmers and dairy producers with high tariffs and quotas, while the EU sought greater access for its agricultural exports, such as cheese, milk and high‑value crops. India’s concern that liberalisation could harm small farmers and domestic production contributed to prolonged negotiations and periodic stalemate.
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Regulatory and standards issues added another layer of complexity. The EU’s insistence on strict food safety, environmental and labour standards posed challenges for many Indian exports, and India sought greater flexibility than the EU was initially willing to offer. The two sides have fundamentally different priorities: Brussels emphasises market access and protections for investors and consumers, whereas New Delhi has sought to safeguard domestic industries while promoting exports in sectors from textiles to chemicals and services.
Ultimately, part of what broke the long impasse was external pressure. Both India and the EU faced higher US tariffs, creating commercial incentives to diversify partnerships. Indian exporters have faced duties of up to around 50 per cent in some US markets, and broader geopolitical tensions — including American tariff threats involving other allies — highlighted the risks of over‑dependence on any single trading relationship. At the same time, concerns about China’s dominance in global manufacturing motivated both New Delhi and Brussels to pursue supply‑chain resilience through closer cooperation. How these varied pressures have shaped the final content of the India EU Trade Deal remains to be fully seen once the text is legally consolidated.
Not a Cakewalk: Ratification Challenges for the India EU Trade Deal
Although the India EU Trade Deal has been negotiated and agreed in principle, it is not yet legally effective. Before it can take effect, both India and the EU must complete formal approval processes. For the EU, this involves not just the European Commission but also the European Parliament and the national parliaments or governments of all 27 member states. The deal is therefore subject to ratification, a multifaceted and potentially contentious exercise rather than a mere formality.
Unlike India, where the central government can approve a negotiated agreement with relative speed, the EU’s ratification procedure involves multiple layers of political and legal scrutiny. Member states may face domestic political pressures from farmers, automakers, unions, environmental groups and other stakeholders demanding changes or safeguards before approval. These interests can exert significant influence on lawmakers’ willingness to support the pact.
Looking at recent experience with another large trade agreement — the EU–Mercosur pact with the South American trade bloc — offers a cautionary precedent. That deal took more than 20 years to negotiate and is still not fully ratified because of political objections in member states, concerns about environmental and labour standards, and prolonged parliamentary debates. Trade analysts and officials have warned that similar hurdles could arise in the context of the India EU Trade Deal, particularly in sectors such as automobiles, agriculture, dairy and environmental regulation. Some officials have indicated that formal signing of the India–EU pact is expected later this year, with implementation envisaged by early next year, but timing remains uncertain.
Lessons from Mercosur: Will the India EU Trade Deal Stall?
Concerns that the India EU Trade Deal might encounter ratification setbacks similar to those experienced by the Mercosur agreement are already circulating in Brussels and New Delhi. In the Mercosur case, the European Parliament voted to refer the agreement to the European Court of Justice (ECJ) for a formal legal review before granting its approval. A vote in the European Parliament recorded 334 in favour, 324 against and 11 abstentions on the question of sending the text to the ECJ; the court’s review is expected to take many months or even years. This judicial vetting, required under EU law when there are legal doubts about treaty compatibility, effectively paused the process until the court issues its opinion, and Parliament can then proceed.
That experience shows the depth and durability of procedural and political challenges that can delay a trade agreement long after chief executives have declared victory at a summit podium. The India EU Trade Deal will not be immune to scrutiny along similar lines, especially given the breadth of sectors it touches and the political sensitivities involved on both sides.
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A Subtle Rebuke to Trump — With Tactical Caution
The India EU Trade Deal has been widely interpreted as a geopolitical signal that major economic powers can strengthen ties independently of the United States. Commentators note that concluding a large‑scale agreement at a time when US trade policy under the Trump administration has been characterised by punitive tariffs — and threats thereof — represents a subtle rebuke to that approach. The pact signals an intent by India and the EU to diversify their trade relationships and reduce reliance on the US market.
At the same time, both parties have been careful in their public rhetoric to avoid unnecessarily straining relations with Washington, recognising the wider strategic importance of the US alliance. Indeed, some US officials criticised the deal on strategic grounds, including a remark from a senior US Treasury official alleging that trading with India could indirectly finance Russia’s war in Ukraine through energy purchases — a claim India rejects, saying its energy decisions are guided by domestic needs. The India EU Trade Deal thus spotlights the geopolitical balancing act that both sides are navigating in an era defined by shifting alliances and strategic friction.
Reducing Dependence on China
A further strategic rationale for the India EU Trade Deal lies in reducing economic dependence on China. For the European Union, access to India’s large and growing market offers an alternative to deepening reliance on Chinese manufacturing and supply chains, which Brussels has identified as a source of vulnerability amid export curbs and geopolitical tensions. Diversifying trade partners fits within a broader EU agenda of supply‑chain resilience and economic security.
India similarly views deeper economic engagement with the EU as a means to elevate its role in global trade architecture and avoid over‑dependence on any one major partner, including China. Both sides see their cooperation as part of a wider effort to balance China’s dominant role in global manufacturing and to build a more resilient, multipolar trading system.
For European countries, the India EU Trade Deal opens one of the world’s fastest‑growing markets to European exporters by slashing or eliminating import tariffs on a wide range of goods and services. Estimates from Brussels suggest that tariffs on more than 90 per cent of EU exports to India will be reduced, potentially saving European firms several billion euros a year in duties and improving competitiveness. Sectors such as machinery, chemicals, pharmaceuticals and automobiles stand to benefit, while services sectors including finance, shipping and intellectual property‑based industries could see expanded opportunities.
For Indian exporters and businesses, the agreement is expected to broaden duty‑free access to EU markets for key exports such as textiles, leather, marine products and gems and jewellery. This could spur export growth, support employment in labour‑intensive industries, and enhance integration into global value chains. Indian consumers and businesses may also benefit over time from lower prices on European cars, electronics, medical equipment and wines as tariffs fall, though sensitive sectors such as dairy and some agricultural goods remain excluded.
There is no doubt that the India EU Trade Deal represents a landmark in India’s trade diplomacy and a substantial deepening of economic ties between New Delhi and Brussels. The agreement offers the potential to expand trade volumes, increase competitiveness and strengthen global supply chains over the coming decade. Yet at the end of the day, the ultimate value of this pact will depend on how future negotiations unfold: how both sides manage residual disagreements, how they navigate the complex ratification process, and whether they can avoid the delays that have hampered other large trade agreements. For India, it will be essential to remain firm in securing terms that reflect its strategic interests; for the EU, broader political consensus will be required to translate summit declarations into durable, legally binding outcomes.
Live Updates
- 28 Jan 2026 8:19 PM IST
India’s Offer to the European Union
Update (Jan 28, 2026): According to the government, India has offered the European Union market access across 92.1% of its tariff lines, covering 97.5% of EU exports under the free trade agreement. Of these, 49.6% of tariff lines will see immediate duty elimination, while 39.5% will be phased out over five, seven and ten years. A further 3% of products will be subject to phased tariff reductions, with tariff rate quotas applying to items such as apples, pears, peaches and kiwi fruit.
The government said the agreement is expected to expand India’s access to high-technology imports from the EU, helping diversify import sources, lower input costs for domestic businesses and benefit consumers. Officials added that the tariff commitments would also create opportunities for Indian firms to integrate more deeply into global supply chains.
- 28 Jan 2026 8:17 PM IST
Update (Jan 28, 2026): The government said sectors accounting for over ₹2.87 lakh crore ($33 billion) in exports—currently facing EU import duties ranging from 4% to 26%—will move to zero duty once the FTA comes into force. These labour-intensive industries, including apparel, marine products, chemicals, plastics, rubber, toys and jewellery, are expected to integrate deeper into European value chains, improve export competitiveness and generate employment.
- 28 Jan 2026 8:15 PM IST
Update (Jan 28, 2026): According to the government, India has secured strategic access to European markets under the India-EU free trade agreement, with preferential entry across 97% of tariff lines covering 99.5% of trade value. Officials said more than 70% of tariff lines—covering over 90% of India’s exports—will see immediate duty elimination for key labour-intensive sectors such as textiles, leather and footwear, tea, coffee, spices, toys, sports goods, gems and jewellery, and select marine products, significantly boosting India’s competitiveness in the EU.
- 28 Jan 2026 8:12 PM IST
Update (Jan 28, 2026): The government noted that bilateral merchandise trade between India and the EU stood at around ₹11.5 lakh crore ($136.54 billion) in 2024-25, with Indian exports accounting for roughly ₹6.4 lakh crore ($75.85 billion). Trade in services reached ₹7.2 lakh crore ($83.10 billion) in 2024, and officials said the FTA aims to unlock untapped potential by creating a stable, predictable framework that enables Indian businesses, including MSMEs, to integrate into European value chains and plan long-term investments amid global economic uncertainty.
- 28 Jan 2026 7:36 PM IST
Update (Jan 28, 2026): The Indian government said in a PIB release that the India-EU free trade agreement covers a combined market estimated at over ₹2,091.6 lakh crore ($24 trillion), creating significant opportunities for trade and innovation for nearly two billion people across India and the EU.
