India’s Trade Pact With Europe Offers Promise, Not Quick Gains

In the din surrounding the proposed US–India trade framework, one of India’s most consequential recent achievements has slipped from view: the free trade agreement with the European Union. Branded the “mother of all deals”, the India–EU FTA is undeniably large in scope and ambition. Yet it would be a mistake to assume its benefits will be immediate or evenly distributed.

If anything, this agreement will test India’s institutional patience and industrial discipline far more than it will flatter near-term trade numbers.

India has run a trade surplus of $14–15 billion with the EU in recent years. Bilateral trade crossed $136 billion in 2024-25, with exports at $76 billion and imports at $61 billion. On the surface, it looks comfortably balanced.

However, much of this surplus rests on exports of refined petroleum products made from discounted Russian crude. In effect, Europe has been accessing Russian oil through Indian refineries. As sanctions tighten and supply routes harden, that window will narrow. When it does, the surplus could shrink sharply. 

Seen in this light, the real test of the FTA lies not in tariff schedules but in India’s structural readiness to compete. 

India’s exports to Europe remain concentrated in traditional labour-intensive goods like textiles and garments, gems and jewellery, leather products, handicrafts, marine items and a limited range of farm produce. Lower tariffs will improve competitiveness against suppliers such as Bangladesh, Vietnam and Turkey. 

That part is relatively straightforward. 

What will matter far more is whether Indian producers can meet Europe’s expectations on quality, traceability and sustainability. 

Hidden Hurdles
The European Union’s non-tariff barriers are exacting. Food safety rules are unforgiving. Limits on pesticide residues, toxins and production practices are tighter than in most other markets, and they are enforced without much sympathy for exporters who fall short. 

This approach is now being formalised through the EU’s “Farm to Fork” strategy, which places emission reduction, nutrition security, biodiversity and cleaner production at the centre of its trade and agriculture policy. Imported goods will receive no special treatment. The same stringent limits on residues, toxins and environmental compliance will apply to Indian suppliers. 

For many exporters, this implies a fundamental reset. Compliance will require sustained investment in testing, technology, quality control and certification, along with tighter coordination across fragmented supply chains. 

Yet within this challenge lies opportunity. High-income markets are steadily shifting towards organic, biodegradable and ethically produced goods. Premium food and personal care segments illustrate this trend clearly. 

Europe is actively encouraging certified organic imports. On paper, India is well placed. Its diverse agro-climatic zones and multiple harvest cycles allow it to supply spices, pulses, millets, horticulture produce, cotton and niche foods. 

But if India intends to move beyond rhetoric, it must identify export-oriented organic clusters, support them through agricultural universities and Krishi Vigyan Kendras, and back them with credible certification, logistics and market linkages. Without such groundwork, the organic promise will remain largely theoretical. 

Another constraint is the EU’s Carbon Border Adjustment Mechanism. CBAM seeks to penalise imports with high embedded emissions, covering steel, aluminium, cement and other energy-intensive products. India, like several other developing economies, has objected. It is unlikely to alter the EU’s course. Cutting emissions, improving energy efficiency and cleaning up production processes will have to become part of everyday commercial thinking. 

It is therefore unrealistic to expect a sudden jump in exports once the agreement is signed. Ratification will take time. Even after that, adjustment will be slow and uneven. 

Uneven Ground
Europe, for its part, is clear about what it wants. It is looking to double exports to India from $60 billion to $120 billion within five years. Automobiles, wines and spirits, cosmetics and other high-value goods will lead that push. 

There is an asymmetry here. European firms are institutionally and technologically better prepared to enter India than many Indian firms are to meet Europe’s demanding standards. 

This places responsibility squarely on Indian policymakers and industry leaders. Export ambitions must be translated into sector-specific strategies and supported by serious compliance infrastructure — testing facilities, certification systems and efficient logistics. 

Strengthening labour-intensive exports that genuinely meet European benchmarks is not merely about trade balances. It is central to employment, rural incomes and industrial modernisation. 

Trade, however, is only one part of the relationship. The more lasting gains will come from investment, joint research and technology exchange. European capital and technology can deepen India’s manufacturing capabilities, improve managerial standards and help industry absorb new processes more quickly. Collaboration in clean energy, pharmaceuticals, agri-tech and advanced materials would, over time, matter far more than marginal tariff cuts. 

Those expecting quick gains may be disappointed. Those prepared to build capability over time may find that the agreement reshapes India’s export base in more durable ways.