India-EU European Union have finalized the draft of a historic Free Trade Agreement (FTA), paving the way for both sides to grant each other Most Favoured Nation (MFN) status for five years once the deal comes into force.
According to a Reuters report, the MFN provision in the draft text will bind both India and the EU to World Trade Organization (WTO) rules, ensuring that neither side imposes new import or export restrictions beyond agreed global trade norms.
18 Years of Negotiations Culminate in Breakthrough
The agreement, concluded after nearly 18 years of negotiations, is expected to take effect within a year following legal scrutiny and ratification by the European Parliament and Indian authorities.
Under the deal, tariffs on approximately 96.6% of traded goods by value will be progressively reduced or eliminated. India will phase out tariffs on about 96% of goods over a ten-year period, while the EU will open 99.5% of its market by trade value, with most tariff lines reduced to zero either immediately or within seven years.
Sensitive agricultural sectors such as dairy, rice, sugar, and beef have been excluded from the agreement.
Major Economic Impact Expected
The EU estimates that the agreement could double its exports to India by 2032, generating annual tariff savings of nearly €4 billion for European companies.
Prime Minister Narendra Modi described the agreement as “a new blueprint for shared prosperity.” Meanwhile, Ursula von der Leyen, President of the European Commission, said the pact would create “a free trade area of two billion people,” strengthening economic security in an increasingly volatile global environment.
Boost for Key Sectors
Indian exporters in textiles, leather, gems, and seafood are expected to gain immediate zero-duty access to the EU market. On the other hand, European car manufacturers and wine and spirits producers will benefit from substantial tariff reductions in India.
Beyond tariffs, the draft agreement locks in WTO-aligned food safety and plant health standards, streamlined customs procedures, and a binding dispute resolution mechanism.
The pact also commits both sides to deeper digital trade cooperation while recognizing privacy as a fundamental right. Provisions on intellectual property, labour standards, sustainable development, and services trade are included, expanding the scope beyond goods.
If implemented as expected, the India-EU FTA could mark one of the most significant trade milestones for both economies in the coming decade.
