India–EU FTA: Why the final mile will decide the future of the partnership

By Sanjeev Oak

As India and the European Union approach the final stage of a long-negotiated free trade agreement, the hardest choices still lie ahead. The outcome will depend less on economics and more on political resolve, regulatory compromise, and a shared reading of global uncertainty.

The most difficult stage of any free trade agreement is not its beginning, when ambition is high, and positions are flexible. It is the final stretch, when negotiators must translate intent into binding commitments, and governments must prepare to defend compromise before domestic audiences. That is where the India–European Union Free Trade Agreement now stands.Negotiations between India and the EU began nearly two decades ago, stalled amid disagreements, and were revived in a completely different global context. The world the talks now inhabit is one marked by disrupted supply chains, geopolitical rivalry, and a growing scepticism about globalisation as it was once practised. This change in context explains both the renewed urgency and the persistent difficulty of the talks.

Trade agreements fail late not because ambition disappears, but because the cost of compromise becomes visible.

Why the agreement matters now

For both India and the EU, the FTA has come to represent more than a trade arrangement. It is increasingly viewed as a strategic instrument. The EU, shaken by its dependence on concentrated supply chains and exposed vulnerabilities in critical sectors, is actively diversifying economic partnerships. India, with its expanding market and manufacturing ambitions, fits that requirement.For India, the calculus is equally strategic. Access to the European market is not merely about export volumes; it is also about market share. It is about long-term investment, technology inflows, and integration into higher-value segments of global supply chains. The agreement also signals India’s willingness to engage deeply with major economies while retaining control over its development path.Together, India and the EU account for a significant share of global economic output and population. A comprehensive agreement between them would rank among the largest bilateral trade pacts in the world. Yet size alone does not explain its importance. Timing does.

In a fractured global economy, trade agreements have become instruments of alignment.

The limits of tariff-centred debate

Public discussion of the FTA often focuses on tariff reductions — particularly in politically sensitive sectors such as agriculture, automobiles, and dairy. These issues matter, but they are not the core of the negotiation. Tariffs can be phased, adjusted, and protected through safeguards. Regulatory commitments cannot.The most contested chapters of the agreement concern intellectual property, digital trade, sustainability norms, public procurement, and dispute settlement. These provisions shape domestic policy space long after the agreement is signed. They determine how governments regulate markets, protect consumers, and balance competition with public interest.For India, the concern is that excessive regulatory binding could limit future policy choices, especially in sectors still undergoing structural transformation. For the EU, the challenge lies in preserving the integrity of its regulatory system while negotiating with an economy shaped by different stages of development.This is why the final mile has proved so difficult. It is not a matter of finding technical solutions, but of reconciling distinct approaches to regulation and governance.

The hardest negotiations are about rules, not rates.

Sustainability and the question of balance

No issue illustrates this tension more clearly than sustainability. The EU has sought to embed environmental and labour standards within the agreement, reflecting strong domestic political consensus. India has resisted approaches that could operate as non-tariff barriers or impose uniform standards without regard to developmental differences.India’s position is rooted in a long-standing argument: climate responsibility must be differentiated. Measures that penalise production without enabling transition risk entrench inequality rather than addressing environmental goals. Small and medium enterprises, in particular, fear compliance costs that could undermine competitiveness.At the same time, the sustainability chapter also presents an opportunity. If designed as a framework for cooperation rather than conditionality, it could unlock investment in green technology, facilitate cleaner industrial processes, and align long-term climate objectives with economic growth.Whether sustainability provisions unite the two sides or deepen disagreement will depend on whether they are framed as collaboration or compliance.

Climate ambition imposed through trade will struggle; climate ambition supported through cooperation may succeed.

Strategic convergence, not strategic sameness

There is a tendency to frame the India–EU relationship in terms of shared democratic values. While this provides a useful narrative, it does not fully capture the nature of the partnership under negotiation. India and the EU do not approach trade from identical perspectives, nor do they share the same regulatory instincts.What they share is an interest in preserving a rules-based economic order at a time when unilateralism and economic coercion are becoming more common. For middle and emerging powers, the erosion of multilateral trade rules reduces leverage and predictability.In this sense, the FTA is less about creating a privileged bloc and more about reinforcing norms that allow diverse economies to coexist within a common framework. That objective may appear abstract, but its absence would be felt in disputes resolved through power rather than procedure.

Rules in trade are not moral claims; they are strategic necessities.

The domestic political hurdle

The fate of the agreement will be shaped as much by domestic politics as by negotiations. In India, concerns remain among farmers, small manufacturers, and labour-intensive sectors about increased competition from European producers. In Europe, scepticism remains over labour standards, data governance, and market access symmetry.These concerns reflect constituencies that face immediate adjustment costs. Addressing them requires more than reassurance. It requires credible transition strategies, safety nets, and a clear articulation of long-term gains.Trade agreements falter when governments underestimate the importance of domestic consensus. Negotiators can close texts; only political leadership can sustain them.

No trade agreement survives if its politics are left unmanaged.

What success would actually mean

Together, these will determine whether the agreement can withstand economic stress, policy shifts, and political change without losing credibility.Success would also mean acknowledging asymmetry rather than pretending it does not exist. Phased commitments, sector-specific safeguards, and institutional cooperation can address the imbalance without diluting ambition.Failure, by contrast, would reinforce scepticism about comprehensive trade agreements between economies at different stages of development. It would strengthen the argument for narrow, transactional arrangements — a model that favours larger powers and reduces strategic options for others.

The cost of failure is not stagnation, but diminished choice.

A decision that will age over time

The true value of the India–EU FTA will not be evident at the moment of signing. It will emerge over the years — in investment decisions taken, supply chains diversified, and disputes resolved within agreed frameworks rather than through confrontation.The final mile is difficult because it demands decisions whose benefits are delayed but whose costs are immediate. It tests whether governments are prepared to think beyond electoral cycles and accept short-term discomfort in pursuit of long-term stability.If concluded with care, realism, and balance, the agreement could anchor a more stable economic partnership in an unstable world. If abandoned at the threshold, it will be remembered as a moment when caution outweighed strategy.

Trade agreements are judged less by their ambition than by the confidence they reflect.