India and the European Union have agreed to grant each other Most Favoured Nation (MFN) status once their long-awaited trade agreement takes effect, according to a draft text released on Friday. The move will prevent either side from offering better tariff terms to other trading partners for five years after the pact becomes operational.
The two sides reached the deal last month after prolonged negotiations, aiming to reduce tariffs on most goods and expand bilateral trade at a time of heightened global trade tensions.
The agreement, expected to come into force within a year following legislative ratification, is projected to significantly boost trade flows. The EU has said the pact could double European exports to India by 2032 by eliminating or reducing tariffs on 96.6% of traded goods by value. European companies are expected to save around 4 billion euros ($4.7 billion) annually in duties.
However, sensitive agriculture-related products — including soya, beef, sugar, rice and dairy — have been excluded from the scope of the deal.
Both India and the EU have committed to adhering strictly to World Trade Organization rules by refraining from imposing new import or export restrictions beyond WTO provisions.
To facilitate smoother trade, the two partners will align food safety and plant health standards with WTO benchmarks and simplify certification and audit procedures. The draft also outlines enhanced customs cooperation, faster clearance of goods, and binding commitments after ratification.
One year after the agreement takes effect, both sides will begin exchanging annual import data to monitor implementation and tariff preference usage. They have also pledged to ensure transparent and non-discriminatory appeal procedures for customs decisions affecting trade.
On digital trade, India and the EU have agreed to reduce unjustified barriers and promote a secure and open online environment. The draft text recognizes privacy as a fundamental right while preserving each side’s authority over personal data protection and cross-border data transfer rules.
The agreement further promotes paperless trade and the legal recognition of electronic contracts, signatures, and authentication systems.
Separately, the EU has committed to mobilizing finance and investment to support India’s efforts to reduce greenhouse gas emissions under the proposed framework.
The exchange rate used in the draft indicates $1 equals 0.8461 euros.