India and the European Union have reached an agreement to extend Most Favoured Nation status to each other for five years once their Free Trade Agreement (FTA) takes effect. The development follows meetings between European Commission President Ursula von der Leyen, European Council President Antonio Costa, and Prime Minister Narendra Modi in New Delhi.
A Historic Trade Pact
Announced on January 27, the agreement – described as the ‘mother of all deals’ – will witness 93 per cent of Indian exports enter the EU’s 27 member states duty-free. Conversely, import costs for EU luxury cars and wines are expected to decrease.
The deal unites the world’s fourth-largest economy, India, with the EU, the second-largest economic bloc. Together, they represent 25 per cent of global GDP and roughly one-third of global trade, valued at approximately USD 11 trillion out of a total USD 33 trillion.
The European Union is currently India’s largest trading partner, with bilateral goods trade reaching USD 135 billion in FY 2023–24. Officials anticipate the FTA will significantly expand commercial ties between the two sides.
Shifting Global Dynamics
The agreement is expected to qualitatively transform India-EU relations across multiple sectors. This comes as global commerce faces disruption from tariff-driven policies originating in the United States, prompting both New Delhi and Brussels to seek deeper economic cooperation.
Under the proposed deal, India may sharply cut import tariffs on EU cars to 40 per cent, down from a current peak of 110 per cent. Initial tariff reductions will apply to select EU cars priced above roughly Rs 16.3 lakh ($17,739), with further reductions to 10 per cent anticipated over time.
Frequently Asked Questions
When did India and the EU conclude negotiations for this trade agreement?
India and the European Union announced the conclude of negotiations for their free trade agreement on January 27.
What percentage of Indian exports will enter the EU duty-free under the agreement?
93 per cent of Indian exports will enter the 27-nation bloc duty-free.
How long will the Most Favoured Nation status be extended to each other?
India and the European Union will extend Most Favoured Nation status to each other for five years once the Free Trade Agreement takes effect.
As this agreement moves toward implementation, will it reshape the economic landscape for both India and Europe?
