Long-term talk of deeper Europe-India trade ties is finally accelerating as the mutual value becomes more obvious. This results from common struggles with superpowers US and China, as well as the recognition that the world’s most populous country needs help with its growth and Europe wants to be part of that story.

Nonetheless, UK and EU Free Trade Agreements with India are best seen as part of an ongoing process rather than the final outcome. These FTAs are shallow, and there are numerous headwinds such as very different views of the world. This means all governments concerned will need to work hard to see significant economic benefits.

The UK-India FTA is expected to come into force this year, with the EU-India equivalent probably at least a year behind. In both cases, their conclusion is still ahead of hopes, since negotiations only really began in 2022, even if building on previously suspended efforts. For India, the economic slowdown during COVID-19 provided an impetus. For the EU and the UK, a large Indian market behind tariff walls was incentive enough. However, it was the turbulence of Trump’s tariffs that provided the extra push to the conclusion.

Details of the EU-India FTA are slowly being published, with partial liberalisation for trade in goods seemingly similar to that for the UK. This reflects that both decided that holding out for full tariff removal from India was not realistic, even at this moment.

Protests against its trade deal with the United States serve as a useful reminder of delicate politics, involving farmers, trade unions and opposition parties, in Indian trade policy. Even if the protests also reflected a reaction to a public display of US coercion, it is reasonable to argue that European negotiators got the best deal they could, given deep-rooted internal resistance in India.

These deals seem in line with earlier ones reached by India in 2022 with the UAE and Australia. While industries such as the UK dairy sector might be disappointed at not gaining access, India has not discriminated when it comes to the lack of trade liberalisation, given that it previously walked out of RCEP talks, among other reasons, after lobbying from powerful dairy interests like Amul.[1]

Beyond goods tariff schedules, the UK and EU FTAs also offer very little substance on other key pillars of modern trade, such as liberalising trade in services. For the UK, in particular, this seems to be a missed opportunity given that its trade with India is over 60% services as per the latest figures[2] — very different to EU-India trade, which is over 60% goods[3].

The UK is a services superpower, and India could become one with domestic reforms. Protectionism shielding the Indian service sector from foreign competition may have also stopped it from creating more global powerhouses outside of IT. There are strong domestic lobbying forces, which have not been counterbalanced.

Some other outstanding concerns expressed by UK stakeholders are limited action on non-tariff barriers, in particular the growing use of Quality Control Orders (QCOs), lengthy transition periods for tariff liberalisation, and the lack of investment protection.[4] In time, we may see similar complaints from EU stakeholders too, although it at least secured some discipline on QCOs. India, too, did not see significant gains in terms of movement of people under Services Mode 4, running up against European defensiveness on the movement of people.

A further factor limiting the impact of these FTAs is that India and the UK typically struggle with implementation. The ‘Preference Utilisation Rate’ (PUR) showing what percentage of goods eligible for lower tariffs actually benefitted shows that UK exporters recorded PURs of 74%, 56% and 52% respectively under FTAs with the EU, South Korea and Canada in 2022.[5] The PUR for Indian exporters is much lower, hovering around 25% or less for many FTAs.[6] In comparison, PURs for EU exporters to the UK, South Korea and Canada were higher at 88%, 78% and 61% respectively in 2022.[7] Fixing these issues is rarely easy.

Then there is the question of what level of integration in global value chains (GVCs) can be expected for manufacturing as a result of these FTAs, as India is behind other developing countries in integrating.[8] Not being part of mega-regional agreements such as RCEP or CPTPP means that, as countries in the Asia-Pacific foster deeper economic integration, India’s manufacturing development is likely to be hampered. A more self-reliant (“atmanirbhar”) India could also be a more isolated India.

Concerted ongoing efforts by governments will be needed to reduce these obstacles and obtain the benefits all seek. In this sense, the FTAs do create a starting point for more UK and EU trade-focused engagement with India in setting up a mechanism for regular dialogues and contact. This sober reality sits poorly, though alongside the hype that seems to accompany all modern trade deals. On this occasion, the EU outdid the usually overexcitable UK, with Ursula von der Leyen proclaiming the FTA with India “the mother of all trade deals”, obscuring just how much effort is still required to obtain benefits.

Perhaps hype will help these FTAs to act as a signal for businesses to pursue closer trade and use the preferences. The immediate future of Europe-India trade will depend on how they feel about doing business in India, how India’s domestic policies and institutions can welcome them, and whether this can be encouraged by inter-government dialogue. For example, India, for the first time, opened up the public procurement market in an FTA for UK businesses, but whether this will translate into bids or indeed a transparent and fair procurement process will require more than words on paper.[9]

Continuing domestic reforms in India will also be important, whether sparked by politics or crises. There are high ambitions for continued economic development, and the government has passed some significant reforms in recent years, which could be further stimulated by these FTAs. Clearly it also needs to work significantly to improve PURs and engage with growing European protectionism.

In summary, these agreements should best be seen as stepping stones to opportunities in the future, requiring sustained and sensible efforts from all governments. Notwithstanding previous promises falling short, if necessary political will exists, these agreements could yet be the start of something far bigger.

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Footnotes

[1] https://www.fnbnews.com/Top-News/relief-for-milk-and-dairy-segment-as-india-opted-out-of-rcep-agreement-52184

[2] https://assets.publishing.service.gov.uk/media/697a2b2fed48165466652ffb/india-trade-and-investment-factsheet-2026-02-02.pdf

[3] https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/india_en

[4] https://publications.parliament.uk/pa/cm5901/cmselect/cmbeis/996/report.html

[5] https://www.uktpo.org/briefing-papers/how-much-free-trade-in-uk-free-trade-agreements/

[6] https://www.iima.ac.in/sites/default/files/2023-03/MCFME_FTAs.pdf

[7] https://circabc.europa.eu/ui/group/7fc51410-46a1-4871-8979-20cce8df0896/library/4a0a5894-dfc7-483b-8aa3-9da9b73d4e5a/details?download=true

[8] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5000482

[9] Supra note 1.

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