India has signed a Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA), which includes Iceland, Liechtenstein, Norway, and Switzerland. This agreement marks a substantial commitment from EFTA countries to facilitate a total investment of $100 billion in India over the next 15 years.
India’s Commerce Minister, Piyush Goyal, highlighted the immense opportunities this investment presents for sectors such as pharmaceuticals, medical devices, and food. Describing the agreement as modern, fair, equitable, and balanced, Goyal emphasized that it is a “win-win” situation for all nations involved.
Prime Minister Narendra Modi also welcomed the agreement, recognizing the global leadership of EFTA countries in innovation and Research & Development across various sectors such as digital trade, pharmaceuticals, clean energy, and more. Modi assured full support from India to EFTA countries to achieve and surpass the committed investment targets.
This development is particularly significant for India as it comes ahead of the general elections scheduled between April and May 2024. The EFTA members, though not part of the European Union, represent substantial economic powerhouses with whom India aims to deepen economic ties.
Negotiations for a broad-based Trade and Investment Agreement between India and EFTA were initiated back in January 2008. After 13 rounds of talks until 2013 and a resumption in October 2016, the trade pact has finally been inked after around 21 rounds of negotiations. The agreement comprises 14 chapters covering areas such as goods, services, rules of origin, intellectual property rights (IPRs), and investment promotion.
Trade between India and EFTA nations totaled around $18.66 billion in 2022-23, with Switzerland leading followed by Norway. Notably, India has a trade deficit with Switzerland and Norway, largely due to imports outpacing exports. Key Indian exports to EFTA countries include chemicals, pharmaceuticals, and gems, while imports comprise gold, pharmaceuticals, watches, ships, and boats.
Under the agreement, the EFTA states have committed to increasing foreign direct investment (FDI) into India by $50 billion within the first 10 years of the agreement’s enforcement, with an additional $50 billion in the subsequent five years. This investment aims to generate one million jobs in India within 15 years from the agreement’s enforcement.
It’s important to note that the success of this investment pledge will depend on India’s ability to maintain a nominal GDP growth rate of around 9.5 percent in US dollar terms over the next 15 years, aligning with the nation’s historical growth rates. The agreement also anticipates the benefits of full implementation to drive these investments.
Ajay Srivastava, Founder of the Global Trade Research Initiative (GTRI), noted that while the commitment is ambitious, governments can only nudge private firms towards investments, not force them.
This trade pact with EFTA, along with ongoing negotiations with the United Kingdom, the European Union, and Oman, reflects India’s confidence and commitment to trade liberalization amid global shifts towards protectionism. As the agreement sets the stage for increased economic collaboration, it opens up new avenues for growth and partnership between India and EFTA nations.
