93% of Indian exports likely to get duty-free access to EU
India and the European Union (EU) have agreed to extend “most favoured nation” (MFN) status to each other for five years from the date their proposed free trade agreement (FTA) comes into force, according to the draft text of the pact released on February 27.
The understanding forms part of the broader trade agreement between India and the European Union, negotiations for which concluded on January 27 after nearly two decades of intermittent talks.
What most favoured nation status means
Under the MFN provision, neither India nor the EU can offer more favourable tariff concessions to other members of the World Trade Organization (WTO) without extending the same benefits to each other during the five-year period.
The commitment is embedded within the larger framework of the India-EU FTA.
Key highlights of the trade deal
The proposed FTA is expected to allow 93 per cent of Indian exports to enter the 27-member EU bloc duty-free. In return, India is set to gradually reduce tariffs on selected European goods such as luxury cars and wines, improving their competitiveness in the Indian market.
Sensitive agricultural sectors — including dairy, rice, sugar and beef — have been kept outside the scope of tariff liberalisation.
The draft agreement also proposes aligning food safety standards with international benchmarks and simplifying certification and audit procedures. Customs cooperation is another major pillar, with provisions for faster clearance of goods, streamlined documentation and fair appeal mechanisms for import and export decisions.
Annual import data will be shared starting one year after the agreement takes effect to monitor the utilisation of tariff concessions and ensure transparency.
Focus on digital trade and dispute resolution
In the digital sphere, both sides have committed to reducing unjustified barriers to online trade while supporting an open and secure digital ecosystem. The provisions aim to facilitate cross-border e-commerce and data-driven trade without compromising regulatory autonomy.
The draft FTA also includes an annexure outlining a structured mediation mechanism for resolving trade disputes. Either party may request mediation if it believes a measure adversely affects bilateral trade, though proceedings can begin only with mutual consent.
The inclusion of a formal mediation framework is intended to provide a faster and less adversarial alternative to traditional dispute settlement channels.
Talks revived after long pause
Negotiations between New Delhi and Brussels began in 2007 but were suspended in 2013 due to disagreements over market access and regulatory standards. Discussions resumed in June 2022 and culminated in the current draft agreement.
The deal was announced following high-level talks in New Delhi between Prime Minister Narendra Modi and European leaders, including European Commission President Ursula von der Leyen and European Council President Antonio Costa.
The agreement will become legally binding only after ratification by both sides.
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