India-EU FTA will likely get ratified but political factors may play spoilsport

India and the European Union concluded a Free Trade Agreement (FTA) on January 27, paving the way for strong geoeconomic relations between the two. However, the deal awaits ratification by the European Parliament, EU member states, and India before entering into force.

Ratification appears likely, given the strategic incentives on both sides to diversify economic and geopolitical partnerships. But the process may be protracted and politically contested, GeoQuant, a unit of Fitch Solutions, has said.

Some members of the EU may raise concerns over sensitive sectors, regulatory standards – including the Carbon Border Adjustment Mechanism, that may lead to delay or conditional approval. Domestic political pressures can also play a role in the ratification of the FTA, as with past EU trade agreements.


Fitch unit said that parliamentary scrutiny could also slow the ratification progress in India, particularly where stakeholders question the enforceability of FDI provisions or seek further revisions on carbon-related measures and agricultural market access.

The formal signing of the India-EU free trade agreement will take place after legal scrubbing, Commerce Secretary Rajesh Agrawal had said earlier, following which the deal will move towards ratification on both sides.

GeoQuant's risk chart on India's Investment/Trade Policy continues to fall, supported by the conclusion of a landmark Free Trade Agreement with the EU on 27 January. "The pact is of major geoeconomic significance as it would cover one-third of global trade and about a quarter of global GDP if fully implemented," the tech firm said.

India-EU trade deal

The trade agreement will cover close to 99% of Indian exports to the EU and about 97% of European exports to India, making it one of the most comprehensive trade pacts either side has signed. This ends nearly two decades of stop-start talks between the two economies.

The India-EU trade pact is expected to benefit sectors such as machinery, automotive, pharmaceuticals, and financial services, while granting Indian exports, including textiles, engineering goods, and spices, improved access to the EU market. It would also foster deeper integration in services, investment flows, and labor mobility.

Commerce Minister Piyush Goyal said that both sides chose to defer or ring-fence politically and economically sensitive issues to arrive at what he described as a balanced outcome.

“Leaving the sensitive issues aside and coming up with a balance, equitable FTA which is a win-win for all sections of industry—on both sides,” he said.