India recently signed a landmark free trade agreement with the European Free Trade Association (EFTA). The historic signing of the India-EFTA trade deal was the successful conclusion of 21 rounds of negotiations spanning 15 years. The deal strengthens India’s plans to diversify its trade partners worldwide and enhances its export capabilities, foreign investments, and supply chain integrity.
Established in 1960, the EFTA, comprised of Iceland, Liechtenstein, Norway, and Switzerland, is an intergovernmental organisation promoting economic cooperation and free trade in Europe. The trade deal is slated to bring forth investments amounting to $100 Bn and a million direct jobs in India in the next fifteen years. India has offered 105 sub-sectors to the EFTA and secured commitments in 128 from Switzerland, 114 from Norway, 107 from Liechtenstein, and 110 from Iceland.
Government Initiatives Fostering India-EFTA Trade Deal
The Government of India has offered 82.7% of its tariff lines, which covers 95.3% of EFTA exports, to foster bilateral trade. The reductions in customs duty on goods imported from the EFTA countries are to help lower the prices of items like Swiss cheese, chocolate, wine, and other processed food products, along with watches, clocks, and more. Moreover, India has offered concessions on 105 sub-sectors, including accounting, IT, healthcare, etc. Concessions are expected to increase the nation’s services exports in the sub-sectors to the EFTA countries.
Concessions and policy support will help EFTA countries chart their journey in India with confidence and assurance. The deal would stimulate India’s services exports in sectors of its key strength, such as IT, business, personal, cultural, sporting, recreational, education, and audio-visual services.
Investment Opportunities Under India-EFTA Trade Deal
A distinctive and unprecedented element of the India-EFTA trade deal is the binding commitment on the part of the EFTA bloc to invest $100 Bn in India in the next 15 years. Investments will focus on manufacturing companies in India within industries like chemicals, pharmaceuticals, machinery, and food processing, which are some of the nation’s primary exports, along with service exports like IT services, accounting, and more. The investments are also to be directed towards infrastructural sectors.
The trade deal will strengthen India’s manufacturing & services infrastructure, spur innovation, create jobs and upskill the workforce. The deal will encourage domestic manufacturing in infrastructure and connectivity, manufacturing, machinery, pharmaceuticals, chemicals, food processing, transport and logistics, banking and financial services and insurance. The deal offers an opportunity to integrate India into EU markets. With over 40% of Switzerland’s global services exported to the European Union (EU), it is a compelling opportunity for Indian companies to make Switzerland their base to reach the EU market.
Enhanced Market Access for India & EFTA Members
The trade agreement is expected to enhance India's trade relations with Europe. Moreover, it is expected to improve market access for India and the EFTA bloc. As the vanguard of European countries to secure an FTA with India, the EFTA bloc now has market access to the nation that is estimated to become the fifth-largest consumer market across the globe by 2025. The agreement also benefits India, as exporters now have market access to Europe, especially those who manufacture and export within food processing, pharmaceuticals, and organic chemicals industries.
According to the agreement, the EFTA bloc is offering 92.2% of its tariff lines to Indian exporters. Rather significantly, the EFTA bloc offers 100% market access to India for non-agricultural products along with tariff concessions on Processed Agricultural Products (PAP).
Strategic Priorities of the Trade Deal
The trade deal, which focuses on foreign investments and bilateral trade, has prioritised tariff reductions and simplification of trade procedures between India and the EFTA bloc. This is specifically for high-value fish from Iceland and Norway, advanced chemicals, pharmaceuticals, machine equipment, and Swiss chocolate.
EFTA countries can now export processed foods and drinks, electrical machinery, and other engineering items to a market base of 1.4 Bn strong nations at low tariffs. Meanwhile, India is seeking foreign investments from EFTA countries in manufacturing companies (private and government-supported) along with mobility and market access to other European countries through the EFTA bloc.
The Future of Bilateral Trades for India-EFTA
The trade deal is expected to increase foreign investments from EFTA nations, with the Norwegian Sovereign Wealth Fund at their discretion and Switzerland’s existing trade interests in India. These investments and job creation opportunities are expected to ensure both revenue for India and stability for the country’s economy.
The agreement is also projected to boost bilateral trade in technology and knowledge in the manufacturing sector, including pharmaceuticals, food processing, automobiles, and more.
Conclusion
With a total population of 13 Mn, the EFTA countries are the tenth-largest traders of merchandise in the world and the eighth-largest providers of commercial services. Accounting for a combined GDP of $1 Tn when considering the population size would be staggering enough if it were not for their long-standing and illustrious history as trading partners in goods and services for the EU.
India’s free trade deal with EFTA puts the nation on the front foot towards its ascension to greater heights and success in international commerce.
- https://www.efta.int/about-efta/european-free-trade-association#:~:text=The%20European%20Free%20Trade%20Association%20(EFTA)%20is%20the%20intergovernmental%20organisation,economic%20integration%20between%20its%20members.
- https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2013169#:~:text=For%20the%20first%20time%20in%20history%20of%20FTAs%2C%20binding%20commitment%20of%20%24100%20bn%20investment%C2%A0%20and%201%20million%20direct%20jobs%20in%20the%20next%2015%20years%20has%20been%20given.
- https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2013169#:~:text=India%20is%20offering%2082.7%25%20of%20its%20tariff%20lines%20which%20covers%2095.3%25%20of%20EFTA%20exports%20of%20which%20more%20than%2080%25%20import%20is%20Gold.
- https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2013169#:~:text=For%20the%20first%20time%20in%20history%20of%20FTAs%2C%20binding%20commitment%20of%20%24100%20bn%20investment%C2%A0%20and%201%20million%20direct%20jobs%20in%20the%20next%2015%20years%20has%20been%20given.
- https://www.efta.int/sites/default/files/documents/legal-texts/free-trade-relations/india/1.%20Main%20Agreement.pdf
- https://ddnews.gov.in/en/india-poised-to-become-worlds-third-largest-consumer-market-by-2026-outpacing-germany-japan/#:~:text=The%20projections%20indicate%20that%20India,emerging%20wealthy%20segment%20in%20India
- https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2013169#:~:text=EFTA%20is%20offering%2092.2%25%20of%20its%20tariff%20lines%20which%20covers%2099.6%25%20of%20India%E2%80%99s%20exports.%20The%20EFTA%E2%80%99s%20market%20access%20offer%20covers%20100%25%20of%20non%2Dagri%20products%20and%20tariff%20concession%20on%20Processed%20Agricultural%20Products%20(PAP).
- https://www.efta.int/about-efta/european-free-trade-association
