New Delhi and Brussels have agreed to a five-year period of Most Favoured Nation (MFN) status for each other, preventing either side from extending more favorable tariff terms to other trading partners, according to a draft of the India-European Union free trade agreement released Friday.
The agreement, finalized last month after nearly two decades of negotiations, aims to significantly reduce tariffs on a wide range of goods and bolster bilateral trade. The European Union anticipates the deal will double its exports to India by 2032, eliminating or reducing tariffs on 96.6% of traded goods by value, and generate approximately €4 billion ($4.7 billion) in annual savings for European companies.
While the pact represents a significant step forward in economic cooperation, certain agricultural products – including soya, beef, sugar, rice, and dairy – have been excluded from the tariff reductions, officials confirmed.
Beyond tariff reductions, the draft agreement commits both India and the EU to refrain from imposing new import or export restrictions that are inconsistent with World Trade Organization (WTO) rules. It also outlines plans for increased collaboration on digital trade, a key area of focus for both economies. The agreement will align food safety and plant health measures with WTO standards, streamlining certification and audit procedures to facilitate smoother trade flows.
To enhance trade efficiency, New Delhi and Brussels will begin exchanging annual import data one year after the agreement comes into force, allowing for monitoring of implementation and the utilization of tariff preferences. The agreement also establishes non-discriminatory and accessible appeal procedures for customs decisions impacting imports, exports, and goods in transit.
On the digital front, India and the EU have pledged to minimize unjustified barriers to digital trade and foster a secure online environment. The draft text recognizes the fundamental right to privacy while upholding each side’s authority over personal data protection and cross-border data transfer regulations. It also promotes the adoption of paperless trade practices and provides legal recognition for electronic contracts, signatures, and authentication methods.
The European Union will also mobilize financial resources and investment to support India’s efforts to reduce greenhouse gas emissions, as outlined in the draft agreement.
The agreement is expected to take effect within a year, pending legal vetting and ratification by the European Parliament and Indian authorities. The continuation of MFN benefits beyond the initial five-year period will be subject to a review, including consideration of developments related to the entry, stay, and work rights of Indian students within the EU, as well as progress on social security arrangements with EU member states, according to the released text.