The India–EU trade deal and the politics of caution

When the India–EU trade deal was announced, the superlatives came thick and fast. “Historic.” “Transformational.” The “mother of all deals.” Leaders lined up to celebrate its scale, while analysts rushed to quantify what two billion consumers and trillions of dollars might mean for global trade. It was a moment dominated by numbers and headlines.

What caught my eye, while working through the official factsheets and political statements, was a quieter phrase used by Marta Bengoa of ORF America: economic insurance. It felt more honest than the headline language. Less about the revival of free trade, more about managing risk. Less about optimism, more about navigating a world where trade is no longer predictable or insulated from politics.

That framing matters, particularly when viewed from New Zealand, where trade policy is rarely about spectacle and almost always about reading signals correctly.

 A deal built on ambition, designed with restraint

There is no disputing the scale of the agreement. The India–EU Free Trade Agreement links the world’s second- and fourth-largest economies, creating a trade zone of nearly two billion people. European Commission President Ursula von der Leyen leaned into that symbolism when the deal was announced.

“The EU and India make history today, deepening the partnership between the world’s biggest democracies. We have created a free trade zone of 2 billion people, with both sides set to gain economically. We have sent a signal to the world that rules-based cooperation still delivers great outcomes.”

The emphasis on rules-based cooperation is revealing. It reflects Europe’s growing unease about the erosion of predictable trade norms at a time when tariffs, sanctions, and industrial policy have returned to the centre of economic statecraft.

India’s negotiating posture mirrors that caution. The agreement grants Indian exporters preferential access across almost all EU tariff lines by value, with immediate duty elimination for labour-intensive sectors such as textiles, leather, footwear, gems and jewellery, and marine products. These are politically significant sectors at home, closely tied to employment generation and MSME growth.

At the same time, India has been explicit about what remains off the table. Dairy, cereals, poultry, and other sensitive agricultural products are safeguarded, and policy space is preserved where domestic politics demand it. This is not India applying  protectionism with precision.

Europe’s balancing act

For Brussels, the agreement represents the most ambitious trade opening India has ever offered a partner. It has also been neither quick nor straightforward. Trade Commissioner Maroš Šefčovič described it as the product of sustained political effort rather than ideological alignment.

“After a year of tireless engagement and more than a decade in the making, we have delivered the biggest FTA ever, a deal like no other. High tariffs down, opportunity unleashed.”

Yet even as tariffs fall, Europe has been careful to protect its own domestic red lines. Agriculture, as so often in trade negotiations, tells the story most clearly. Commissioner Christophe Hansen put it plainly.

“Front and centre to these negotiations was maximising new opportunities for our unmatched European products, while protecting European farmers. That is why the tariffs on the most sensitive products such as beef, sugar, ethanol, rice and poultry will remain in place.”

This is not a contradiction. It is the result of deliberate strategy. The deal opens markets where it can be defended politically and builds safeguards where it cannot, ensuring the agreement remains ratifiable as well as ambitious.

 The geopolitics in the background

The agreement lands at a moment of heightened geopolitical tension. The European Union is grappling with renewed US tariff threats, persistent concern about China’s dominance in manufacturing and supply chains, and the unresolved consequences of Russia’s war in Ukraine.

India’s continued engagement with Russia, including discounted oil purchases and participation in military exercises, has unsettled European capitals. Yet the EU has chosen engagement over exclusion. Officials have been candid about the lack of full alignment, while continuing to pursue deeper economic ties.

That decision reflects a pragmatic calculation. India is too central to future supply chains and too important a partner to sideline. Economic integration becomes a stabilising tool, even where political alignment remains partial.

For India, this fits a long-standing preference for strategic autonomy: partnering widely, committing selectively, and avoiding rigid geopolitical blocs.

 Legal review and the politics of implementation

With negotiations concluded, the agreement now enters a critical phase: legal scrubbing, translation, ratification, and parliamentary approval on both sides.

This stage is more than procedural. The final legal text will determine how flexibly commitments can be interpreted, how disputes are resolved, and how exceptions are applied. As EU officials have repeatedly noted, nothing is agreed until everything is agreed, and domestic politics still matter.

For businesses, the real test will be whether the promised market access translates into predictable, usable outcomes, or becomes entangled in compliance complexity.

How the EU’s other Asia trade deals compare with India’s

The European Union already has trade agreements with several Asian countries, including Japan, South Korea, Singapore, and Vietnam, concluded between 2011 and 2020. These agreements generally prioritised rapid tariff reduction, regulatory alignment, and smoother cross-border operations, allowing them to be negotiated and implemented relatively quickly.

India’s agreement sits apart from that group. Rather than broad and fast liberalisation, it is structured around phased commitments, safeguards, and sector-specific exceptions, with elements such as investment protection and geographical indications still being negotiated separately. This slower, more calibrated approach reflects both India’s domestic constraints and the EU’s readiness to trade speed for deeper, longer-term access to a vast and growing market.

 What the deal reveals when read from New Zealand

Much has already been written about how big the India–EU deal is and how long it took to conclude. What is discussed less often is what the agreement reveals about how India now approaches trade when the stakes are high and the partner is powerful.

The pattern is consistent. India liberalises deeply in services, skills mobility, and value-added manufacturing, while protecting politically sensitive sectors with equal consistency. Europe, for its part, accepts this trade-off in exchange for regulatory influence, long-term market access, and a more diversified economic future.

India has shown it is willing to open where partnerships align with its strategic and developmental goals, particularly in services, skills, technology, food processing, and value-added agriculture. What it continues to protect fiercely are politically sensitive sectors such as dairy and large-scale agriculture.

For partners negotiating outside the EU framework, including New Zealand, the significance lies not in the concessions themselves, but in how India implements them. Changes in regulatory practice, standards alignment, and services mobility under the EU deal may quietly reshape India’s trade posture over time.

 Economic insurance, not economic romance

That is why “economic insurance” remains the most accurate way to understand the India–EU agreement. It is not a declaration of faith in free trade’s revival, but an acknowledgement that uncertainty is now structural rather than temporary.

The deal does not assume stability and plans for disruption. It opens markets while preserving exits, and it pairs tariff reductions with legal and regulatory buffers designed to absorb shock. India and the EU have not traded certainty for access. They have designed a framework to manage risk while keeping their options open.

In today’s trade politics, that kind of insurance may be the only certainty left.

-Asia Media Centre