India-EU trade accord: Three aspects that’ll shape its success and four hoops it must jump through

In a best-case scenario, it could act as a bulwark against global hegemony sought to be exercised by a third party. While the FTA is more symbolic than an economic reality at this point, it has three critical aspects that will determine its performance: manufacturing, mobility and non-tariff barriers.

The first is a no-brainer: the deal is visibly designed to boost the factory sector in both economies. India’s enduring concern has been to safeguard its sprawling base of labour-intensive manufacturing, any threat to which could have a wider fallout; lower EU import duties on Indian apparel, textiles, footwear, etc, could well give this segment a leg-up.

Broadly, though, making the most of easier EU-market access would need our manufacturers to sharpen their competitive edge and get past a maze of restrictive entry rules.

India’s tariff relief has nicely been calibrated in highly guarded sectors for gradual exposure of local players to European competition (with a low-duty quota for high-end vehicle imports, for example).

By and large, a wider opening of our market to EU machinery, electrical equipment, aircraft and other items is a nod to Brussels’ need to keep factories humming. In case either side has second thoughts, the FTA allows a general review five years after it goes into force.

An interesting part of this agreement is its mobility pact, which promises freer EU entry for Indian workers and students. The latter stand to gain the most, given the US’s harsh turn on immigration; the enrolment of Indian students in US universities over the peak season of August-September 2025 dropped by nearly 75%. Since state-run UK institutions charge foreign students higher fees to subsidize locals, the allure of EU universities would rise. Worker mobility, however, might be held back somewhat by local political sentiment.

The missing link in mobility seems to be tourism. Indian tourists contribute significantly to the EU economy. Yet, Europe remains tightfisted with visas. Perhaps our negotiators should bring this up during the next stage of FTA talks.

For all the euphoria over the accord, three elephants still loom in the room. The first is the EU’s carbon border adjustment mechanism (CBAM), a protectionist measure on which India only secured a promise of equal treatment as a trade partner on any leeway given. As for the levy, the CBAM can has been kicked down the road, with talks to be held later.

The second is a more familiar non-tariff barrier: the EU’s sanitary and phytosanitary rules that often keep our farm exports out. An EU fact-sheet states that all Indian agri-products must comply with these “very stringent, science-based" standards.

The third and most daunting challenge lies in the ‘last-mile’ path of the deal. Within the EU, the FTA must now jump through four hoops. First, a stage of legal vetting, with text-revision proposals requiring India’s approval. After this, the document moves to the European Council for its nod, before which it cannot be signed by the two parties. In the next stage, the European Parliament must ratify what’s signed. This political body can pose its own hurdles, as seen in the recent EU-Mercosur deal.

Till the India-EU FTA crosses this Rubicon, let’s hold off all celebrations.