India-EU FTA: Big Promise, Bigger Challenges Ahead

Honda recently ran a full-page newspaper ad proclaiming "Deals that'll make your heart skip a beat". Trump has been talking deals too, and so have India and the EU. Ironically, the euphoria surrounding the India-EU FTA in February 2026 mirrors the excitement a year earlier in February 2025, when PM Modi visited the White House in the context of the India-US trade deal, 'Mission 500'. 

Given that deals often prove elusive, the question is: Have we sealed the deal with the EU? Have we stolen a march with this deal? These are pertinent questions, and the answers need careful examination.  

Did we seal the deal?

The EU is a monetary union of 27 countries, which implies a common monetary policy but independent fiscal policies. Trade deals fall under fiscal policy, and hence each member country evaluates the agreement with respect to its own fiscal challenges. 

Though the European Commission negotiates such deals on behalf of all member countries, independent ratification from each is required. The trade deal signed on 27 January will be translated into member countries' respective languages – German, French, Italian, and others. Legal vetting at the European Council is likely underway. 

Any required changes must be approved by the Indian side. The European Parliament will then ratify the deal. Ratification from the Indian parliament is not required in this case. Cabinet approval followed by presidential ratification will seal the deal. Currently, legal vetting is ongoing. 

If all goes well, the deal will come into force in January 2027. 

However, hurdles may emerge. The EU's deal with Mercosur, the trade bloc of South American countries, has been in negotiation for the last 25 years. It was nearly finalized in December 2024, but some member countries like France, Italy, and Poland protested against it. 

An interim trade agreement signed on 17 January 2026 has also run into rough weather. The European Parliament has referred it to the EU's Court of Justice for a legal opinion on its compatibility with EU policies. This amounts to a deferment of up to two years. The EU-India FTA, though carefully drawn, runs the risk of a similar trajectory.

How beneficial is the deal for India?

The deal, if sealed, provides Indian farmers and businesses entry into the lucrative EU market for petroleum products, gems and jewellery, textiles and apparel, engineering goods, specialty chemicals, and pharmaceutical ingredients. 

However, there's no assurance that market access will convert into consumer acceptance. The Indian stock market should have rewarded listed companies in these sectors after the deal's signing, but it didn't. Pharma stocks actually declined, and no significant gains were observed in any other sector. 

This indicates that Indian businesses will need to build the market themselves. The process is expected to be arduous, given that the EU has a sophisticated regulatory framework second to none. 

Indian exports prepared for the US market are unlikely to qualify for the EU due to stricter rules pertaining to chemical usage, traceability of sustainable practices, labour laws, and more. New exporters from India will need extensive training in complex documentation procedures – a challenge that could prove tougher than paying slightly higher tariffs.

What can click for India?

Given the geopolitical situation and India's rising soft power, EU member countries are likely to adopt a more favourable attitude towards India compared to Mercosur countries like Argentina, Brazil, Paraguay, Uruguay, and Bolivia. 

India's defense deals with France will play a major role in securing French approval. 

PM Modi visited Italy in 2025 for the 75th Diplomatic Anniversary, emphasizing trade, technology, and Mediterranean linkages. Italy has been a close friend in recent years. 

Modi also visited Poland in 2025 and gained support regarding the purchase of Russian oil. Poland is likely to support the FTA given its energy security alignment and Central Europe outreach. 

PM Modi's 2024 visit to Poland was the first by an Indian PM in 45 years. Plans for cooperation spanning 2024-28 were chalked out, covering defense, trade, and energy. 

Poland seeks energy partnerships with India and market access for its agri-food and tech exports. Poland has already backed a faster India-EU FTA, viewing India as Asia's key non-China partner for ensuring supply chain resilience and Indo-Pacific security. 

The likelihood of the deal going through is high, yet caution must be exercised, and the applause should be paused until all hurdles are crossed.

Dr VP Singh is PGPM Director at Great Lakes Institute of Management, Gurgaon.

(Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the views of the publication.)