Authors: John Clarke and Suryaprabha Sadasivan*
When India and the European Union concluded their Free Trade Agreement in New Delhi earlier this year, much of the commentary focused on tariff schedules and sector-specific wins. These matter. But counting what was eliminated risks missing what was built.
The FTA arrives as both partners reassess their place in a global economy shaped by geopolitical instability, technological competition, and economic security concerns. As countries seek to diversify away from risky dependencies without retreating from globalization, trade agreements are increasingly becoming instruments of strategic trust as much as market access.
In this environment, the most valuable trade agreements are no longer simply instruments for lowering tariffs; they are frameworks for building trusted economic relationships built on regulatory cooperation. Viewed this way, the India–EU FTA has the potential to become the institutional foundation for a deep strategic partnership between two of the world’s largest democratic economies.
Pharmaceuticals illustrate why. India supplies affordable medicines to more than 200 countries and remains the world’s leading source of generics, yet the EU has absorbed only a modest share of that capacity. The FTA makes important tariff commitments in pharmaceuticals and medical devices, a genuine achievement for both sides and a bold move in particular for India. But it also clarifies where the next challenge lies: regulatory approvals, pharmacovigilance, and compliance systems. Tariff elimination does not by itself produce market access. It shifts the contest to a different terrain, one where trust between regulators, not customs schedules, determines outcomes.
The same dynamic applies within Europe itself. Through structured regulatory cooperation, the agreement may over time encourage greater harmonization of approval processes across the EU (a constant complaint of Indian producers is that they have to secure separate approvals in each member state), improving market access while reinforcing the integrity of the single market.
The same pattern appears more pointedly on carbon. The EU’s Carbon Border Adjustment Mechanism became fully operational this year, and the FTA does not exempt India from it. What it does instead is more telling: it creates a framework for engagement through a carbon border annex, technical consultations, and EU financial and technical support for India’s industrial decarbonization, while leaving CBAM itself intact. India moved from threatening confrontation over CBAM to negotiating the terms of engagement within it, which is consequential given how exposed its steel and aluminum exporters are. Whether that engagement converts into relief that the Indian industry can actually use remains open, a question the FTA’s text alone cannot answer.
More broadly, the CBAM framework illustrates how trade agreements increasingly serve as vehicles for domestic reform on both sides. Just as India may use the agreement to accelerate industrial decarbonization, the EU will need to simplify aspects of its own CBAM architecture if cooperation is to function effectively.
Reading through the agreement, one is struck by how little of it concerns market access and how much is devoted to regulatory cooperation. Across its twenty chapters, it establishes an extensive architecture for consultation, transparency, regulatory dialogue, and institutional coordination. The agreement contains an unprecedented 125 cooperation provisions.
Cooperation: That is the throughline across sectors from medical technology to clean energy to digital services; competitiveness increasingly depends on the ability of two systems to work together, not on one converging toward the other. India’s strategic autonomy was never going to be traded away, and neither side was likely to redesign its regulatory system to accommodate the other. The achievement is as procedural as it is substantive: mechanisms that let both systems interact with less friction and operational adaptation that both sides, not one, will need to sustain.
For India, the gains extend beyond market access. As the country builds out manufacturing capacity, innovation infrastructure, and its case as a trusted supply-chain partner, Europe offers capital, technology, and research collaboration that pure export volumes alone cannot capture. The agreement will be supplemented in the coming months by a parallel agreement on investment protection and Indian participation in the EU’s Horizon Europe flagship research programs. If used wisely, the agreement can propel India’s internal competitiveness and regulatory reform agenda.
For the EU, the agreement reflects a recognition that India is no longer simply an emerging market to be courted, or ‘just’ a counterweight to China, but a partner whose cooperation on carbon, on standards, and on supply-chain resilience Europe now actively needs. The agreement represents a belated recognition by the EU that India is its full equal.
At a time when India is pursuing greater economic integration with the Gulf and Europe through initiatives such as IMEC, the FTA provides an institutional framework that could make those ambitions more commercially meaningful. IMEC’s ports and logistics networks can move goods, but commerce ultimately depends on predictable rules and institutional trust. The two are complementary: one builds physical connectivity, and the other the regulatory architecture that enables economic activity.
More broadly, the FTA should be understood as part of a wider reconfiguration of economic relationships across the Indian Ocean region. As India deepens engagement with the Gulf, East Africa, Southeast Asia, and Europe, a new network of trade, investment, and connectivity is emerging. Some have described this as an “Indosphere”: not a geopolitical bloc, but an economic space connected by commerce, infrastructure, technology, and shared standards. If IMEC provides part of the physical infrastructure linking this geography, the India–EU FTA could provide an important element of its institutional architecture.
None of this is guaranteed, and the risks sit on both sides of the table.
For India, execution is the test. Steel and aluminum exporters, who account for the overwhelming share of India’s CBAM exposure, still lag in the emissions monitoring and verification systems the EU requires, a gap that has already reduced export volumes during the transition period. Pharmaceutical exporters face a similar burden: only a fraction of manufacturing sites have moved fast enough on the compliance upgrades that the EU market access now assumes. Tariff elimination will not rescue exporters unready to meet the standards behind it.
For the EU, the tests are manifold. One is institutional bandwidth. Brussels has just closed this demanding multi-year negotiation while managing Mercosur ratification, reorganizing its relationships with the USA and China, and navigating a host of other competing trade priorities. Another challenge lies in implementation. Delivery will depend not on trade negotiators but on sectoral regulators and departments across areas such as climate, health, energy, and digital policy and whose priorities lie elsewhere, as well as regulators at the member state level, raising questions about whether the agreement’s extensive cooperation agenda can be sustained in practice.
Much will depend on whether the EU truly understands the strategic long-term importance of what it has concluded with India and invests in it, or whether it will regard the FTA simply as a useful means to signal diversification away from China and improve its exports of wines, spirits, and passenger cars before moving on to the next trading partner.
The climate platform and the financial support promised for India’s industrial decarbonization now have to be delivered on a timeline by an institution stretched across multiple fronts and faced with regulatory instability around its climate agenda. A trade agreement that promises technical cooperation—both to ease access to the EU market and to accelerate India’s own decarbonization strategy—is only as credible as the follow-through after signature, something the text alone cannot guarantee.
That may be the most important lesson from both pharmaceuticals and carbon. Trust is not negotiated into existence in a single agreement. It is built afterwards, through implementation that either confirms or undermines what was promised on signing day.
The conclusion of negotiations marks not an endpoint but the beginning of a much more demanding phase of implementation. As a famous statesman once said, “This is not the beginning of the end but the end of the beginning.”
The FTA’s legacy will not be measured by tariff lines eliminated, but by whether two systems with very different starting points can sustain the cooperation the agreement assumes on carbon, on product and service standards, and on the follow-through that determines whether market access is real or merely written down. Deliver on both sides, and the agreement may become the backbone of a partnership stretching from Europe through the Gulf to India. Fall short on either side, and it will be remembered as a well-negotiated text whose implementation failed to match.
*Suryaprabha Sadasivan is Senior Vice-President, Public Policy, at Chase Advisors, a strategic public affairs and policy advisory firm. John Clarke is a former Director at the European Commission and Head of the EU Delegation to the WTO. He is a trade adviser with Fipra consultants, a Fellow of Maastricht University and the Royal Asiatic Society, a member of the British Trade and Business Commission and Vice-President of the Europe-China Economic Cooperation and Development Council.
