India-EU free-trade agreement may take at least a year to kick in after signing

EU commissioner for trade and economic security Maroš Šefčovič with commerce minister Piyush Goyal.

The proposed free trade agreement (FTA) between India and the European Union may take at least a year to come into effect after signing of the much-anticipated pact, given the lengthy ratification processes in the 27-nation bloc, sources have told Moneycontrol.

India and the EU are looking to conclude talks for a trade deal by the end of the year. “It will take time because there are 27 nations in the bloc and some of them have their own ratification process,” a government official said on condition of anonymity.

An industry source talked of even a longer timeline. “It may even take more than a year, given that individual countries may need to ratify the deal, therefore it will be a while till exporters can benefit from lower tariffs,” the source said.

India and EU held the 13th round of talks for the proposed trade deal from September 8-12 during which a significant convergence was achieved in many areas.

The next round of talks will be held in Brussels from October 6-10, as both sides aim to conclude negotiations at the earliest.

How it works?

Trade deals with the bloc are negotiated by the European Commission after approvals from the Council of the EU.

Once the commission completes the negotiations, it publishes the agreement and presents the deal to the council and the European Parliament.

Following which, the council and the European Parliament look into the deal for approvals. If they both approve it, the EU can conclude the agreement.

If the agreement covers areas where EU countries have responsibility, it can only be fully concluded after these countries also ratify and sign the agreement, the European Commission website says.

Between signing and ratifying the deal, parts of the agreement can be “provisionally applied”, put into effect before ratification, if the council chooses to do so.

Provisional application usually only takes effect once the European Parliament gives its go-ahead.

The EU’s free trade agreement (FTA) with New Zealand, for instance, was signed on July 9, 2023 after talks concluded on June 30, 2022.

The European Parliament and the council approved the deal in November 2023, while New Zealand ratified it in March 2024. The agreement came into effect in May 2024, nearly a year after it was signed.

The timeline to ratify the proposed trade deal between India and the EU is crucial, given that both sides are looking to fast-track talks to tide over ongoing disruptions from US President Donald Trump’s trade and tariff policies, which have upended global commerce.

The EU is India's largest trading partner, accounting for 12.2 percent of its trade, ahead of the US (10.8 percent) and China (10.5 percent). The bloc is the second-largest destination for Indian exports after the United States.

India is the EU’s ninth-largest trading partner, accounting for 2.2 percent of its trade in goods in 2023, well behind the US, China and the UK.