India signs FTA deal with EFTA bloc, secures $100 billion investments

After about 15 years of negotiations, India and the small bloc of four European nations in the European Free Trade Association (EFTA) signed a free trade deal that is expected to create 1 million jobs in India and bring investments to the tune of $100 billion.

India’s agreement with the grouping that comprises Switzerland, Norway, Liechtenstein and Iceland, primarily focuses on market access related to goods, rules of origin, trade facilitation, and trade remedies, in addition to sanitary and phytosanitary measures, technical barriers to trade, and investment promotion.

The deal also includes provisions for market access to services, intellectual property rights, trade and sustainable development.

Services exports

The deal, termed the Trade and Economic Partnership Agreement (TEPA), opens a window for Indian companies to integrate their operations with the European Union (EU) market as more than 40% of Switzerland’s global services exports are to the EU. Indian companies can look to Switzerland as a base for extending their market reach to EU.

“For the first time in the history of FTAs, binding commitment of $100 billion investment and 1 million direct jobs in the next 15 years has been given,” said Piyush Goyal, minister of commerce and industry.

“The agreement will give a boost to Make in India and provide opportunities to young and talented workforce. The FTA will provide a window to Indian exporters to access large European and global markets,” Goyal added.

At the signing ceremony, Swiss federal councillor Guy Parmelin said: “EFTA countries gain market access to a major growth market. Our companies strive to diversify their supply chains while rendering them more resilient. India, in return, will attract more foreign investment from EFTA, which will ultimately translate into an increase in good jobs. All in all, TEPA will allow us to make better use of our economic potential and create additional opportunities for both India and EFTA states.”

Iceland foreign minister Bjarni Benediktsson, Liechtenstein foreign minister Dominique Hasler, and Norway trade minister Jan Christian Vestre were present at the signing.

Negotiations between EFTA and India had begun in 2008, following which 21 rounds of talks were held needed to reach an agreement on 10 March 2024.

“Delighted by the signing of the agreement. This landmark pact underlines our commitment to boosting economic progress and create opportunities for our youth. The times ahead will bring more prosperity and mutual growth as we strengthen our bonds with EFTA nations,” Prime Minister Narendra Modi said.

Tax ambit

Under the deal, India has agreed to reduce or remove taxes on 82.7% of the types of goods that it imports from the grouping, excluding gold. A big part of what India imports from EFTA countries is gold, accounting for more than 80% of these imports.

The deal will lead to elimination of duties on most industrial goods currently exported to India by EFTA companies, such as pharma products, machinery, watches, fertilizers, medicines, chemical products, minerals, as well as fish, the agreement said.

Indian industry welcome deal

The Indian industry welcomed the trade deal, saying it would lift ties to new heights.

“EFTA states are partners in India’s growth story and the historic TEPA takes their deep engagement with the Indian economy to an extraordinary level,” R. Dinesh, president of industry lobby Confederation of Indian Industry (CII) said.

Industry lobby Ficci secretary general S.K. Pathak said: “Our businesses look forward to new opportunities in various sectors. Apart from promoting exports the agreement will lead to substantial boost in job creation. An impetus to our journey towards Viksit Bharat (developed India).”

Swiss industry sees competitive edge

The Swiss industry said the deal would “enhance its competitive position,” with Swissmem, a lobby of the Swiss tech industry, saying that the deal will help eliminate duties of up to 22%.

The deal will give a competitive edge to the Swiss tech industry against those from China, the UK, the EU and the US, “which have not yet concluded a similar agreement.”

“The FTA strengthens Switzerland as a centre of industry and secures jobs, while also supporting the manufacturing hub of India through the export of high-tech products and creates new jobs there,” it said.

The pact with India “is a glimmer of hope for export companies in a difficult phase. It brings a specific, long-term improvement to framework conditions for the Swiss technology industry. It also shows that more free trade is possible even in times of increased global bloc formation,” Swissmem director Stefan Brupbacher said.

India’s merchandise trade with EFTA countries in FY23 stood at $18.7 billion, including $1.9 billion in exports.

“Industrial goods, which account for 98% of India’s $1.3 billion merchandise exports to Switzerland in FY2023, are directly impacted,” think tank Global Trade Research Initiative (GTRI) had said in a report in January this year