Financial Express | 28 February 2026
India-EU FTA: Both sides to adopt ‘most favoured nation tag’ for 5 years – What does this mean?
by Anwesha Mitra
India and the European Union will both adopt ‘most favoured nation’ status once the recently signed free trade agreement comes into effect. The 27-nation bloc signed a long-delayed agreement with New Delhi last month — aiming to boost two-way trade amid growing global trade tensions. The deal is expected to double EU exports to India by 2032 by eliminating or reducing tariffs on 96.6% of traded goods by value. It will also lead to savings of 4 billion euros ($4.7 billion) in duties for European companies.
According to a draft released by the Commerce Ministry, the two sides plan to grant each other MFN status for five years once the FTA goes into effect.
During this period neither India nor the European Union can offer better tariff terms to other partners. Put more simply, the clause ensures that if either party signs a new trade deal with another country and offers even better tariff rates, these must automatically extend to its list of Most Favoured Nations.
Both sides have also agreed to avoid curbs beyond World Trade Organization rules and deepen cooperation on digital trade To ease trade flows, New Delhi and Brussels will also align food safety and plant health measures with WTO standards and streamline certification and audit procedures. The text also envisages enhanced customs cooperation and faster clearance of goods — with commitments becoming binding after ratification.
- Read also: EU-India FTA text
What does MFN status mean?
Most favoured nation or MFN status is a principle used in international trade to avoid discrimination among trade partners. Being on this list means the other country is eligible for the lowest tariffs and best trade practices. It has to treat this nation as well as its most favoured trading partner. Therefore any trade advantages extended to one country (or group in case of EU) must be extended to all other MFN partners.
It is a core rule of the WTO and members typically apply the same trade conditions for all other WTO members — unless there is an exception of special deal such as an FTA in effect.
A Free Trade Agreement takes the concept a step further — ensuring that any nation offered a better agreement with the EU or India will automatically lower tariffs between the two groups. No third country (or bloc) can receive a better deal from either partner.
