EU and India Lock in Draft Free Trade Agreement Set to Reshape Global Trade Patterns

On February 27, 2026, the European Union and India finalized the draft of a landmark free trade agreement that represents the culmination of decades of negotiations and signals a major shift in global trade dynamics. Under the draft pact, both parties will grant each other Most Favoured Nation status for five years after ratification, helping prevent either side from offering more favorable tariff terms to other partners during that period.

The agreement envisages tariff reductions or eliminations on goods accounting for roughly 96.6% of trade value between the EU and India, including machinery, electrical equipment, aircraft, and pharmaceuticals. Beyond tariff liberalization, the deal also strengthens cooperation on digital trade, harmonizes food safety and certification procedures in line with international standards, and enhances customs cooperation to facilitate faster clearance of goods.

Analysts widely view the deal as a significant opportunity to boost EU exports to India over the coming decade and to bolster both economies’ roles in global supply chains. While the draft agreement must still be approved by the EU Council, the European Parliament, and undergo India’s domestic ratification process before it can enter into force, it is expected to take effect within about a year once all legislative steps are completed. This pact is regarded as a key economic and strategic achievement for the EU amid shifting global economic landscapes.