While hailing the India-European Union (EU) Free Trade Agreement (FTA) as creating a joint market comprising one quarter of global Gross Domestic Product (GDP), the EU’s Ambassador to India Hervé Delphin also struck a note of caution over regulatory hurdles and “unfinished business” that could overshadow the benefits of the deal. 

Speaking at an event organised by the Federation of European Business in India, Mr. Delphin also said that the FTA would likely be implemented in “early 2027”, a timeline that sources in the Indian government also confirm. Negotiations on the FTA were concluded in January this year.

“Both sides must ensure that the agreement is implemented smoothly and in good faith,” he said. “For this to materialise, we need to align on a pro-FTA mindset and approach across our systems: customs procedures or conformity requirements should serve their purpose and not be used as trade barriers.” 

“If administrative procedures are too burdensome businesses may consider that cost of compliance outweighs the benefits of preferential tariffs, in which case the FTA potential would be lost,” Mr. Delphin added. “That would be a missed opportunity.”

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‘Mother of all deals’

Speaking a little more about the opportunity created by the FTA, the Ambassador said that the agreement would create a free trade zone covering nearly two billion people and a quarter of global GDP. 

“It will connect the world’s largest single market with its fastest-growing economy,” Mr. Delphin said. “It will be the largest FTA ever signed by either side. For all these reasons it has been rightly billed the ‘mother of all deals. This agreement is comprehensive, balanced and commercially meaningful.”

However, he also pointed out some of the shortcomings in the deal. 

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Deal deficiencies

“The FTA does not cover all relevant areas,” he said. “We need to look at ‘unfinished business’ and ‘beyond FTA’. Investment is the main case in point… There is regrettably no FTA chapter on investment liberalisation in non-services sectors, which would have given investors more assurance and predictability.” 

He added that India and the EU should revisit this area two years from the entry into force of the FTA, as was envisaged in the review clause included in the deal.

“Both sides should also conclude promptly the ongoing negotiations on the Investment Protection Agreement (IPA), which would give investors a solid legal framework and additional incentive to expand their economic footprint,” Mr. Delphin said. “The business and political constituencies in Europe are expecting it.”

Steady progress

He added that both the EU and India agree on the fact that the FTA should come into force as soon as possible. Currently, he explained, the legal teams are going through the negotiated text to give it a proper legal form. 

“We aim to conclude the legal scrubbing by the summer with a view to sign the agreement by the end of the year. If the ratification process goes smoothly, and there seems to be broad-based political support for the FTA in Brussels, the agreement could hopefully enter into force in the first half of 2027,” Mr. Delphin said.