India and the European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway, and Switzerland, have signed a Trade and Economic Partnership Agreement (TEPA) on March 10, 2024. The agreement is expected to enhance bilateral trade and investment between the two sides in various sectors, such as pharmaceuticals, medical devices, food processing, banking, digital trade, and clean energy. EFTA countries have also committed to invest $100 billion in India over the next 15 years.
Benefits of the India-EFTA trade deal
The India-EFTA trade deal is the first of its kind to include a commitment on investment from the partner countries. According to Commerce Minister Piyush Goyal, this will open up new opportunities for collaboration and innovation in diverse spheres. He said that the trade deal symbolizes the shared commitment to open, fair, and equitable trade, as well as generate growth and employment for the youth.
The trade deal will also provide Indian consumers access to high-quality Swiss products such as watches, chocolates, biscuits, and clocks at lower prices, as India will phase out customs duties on these goods over a period of time. Similarly, Indian exporters will benefit from lower tariffs and non-tariff barriers in the EFTA markets, especially for textiles, leather goods, gems and jewellery, engineering goods, and chemicals.
Some of the key features of the agreement are:
- India will eliminate tariffs on 93% of its tariff lines for EFTA countries over a period of 10 years. EFTA countries will eliminate tariffs on 99% of their tariff lines for India over a period of 5 years.
- India will grant preferential market access to EFTA service providers in sectors such as banking, insurance, maritime transport, telecommunications, tourism, education, health care, and environmental services.
- EFTA countries will grant national treatment to Indian service providers in sectors such as computer services, research and development services, professional services, construction services, and audiovisual services.
- India will liberalize its foreign direct investment regime for EFTA investors in sectors such as manufacturing, mining, agriculture, fisheries, energy, infrastructure, retail trade, e-commerce, and digital economy.
- EFTA countries will provide legal protection to Indian investors and their investments in their territories.
- India will strengthen its intellectual property rights regime to align with international standards and provide adequate protection and enforcement of EFTA’s intellectual property rights in India.
- EFTA countries will recognize India’s geographical indications such as Darjeeling tea, Basmati rice, Alphonso mangoes, etc.
- India will ensure transparency and non-discrimination in its government procurement practices and provide market access opportunities to EFTA suppliers.
- EFTA countries will ensure fair competition in their markets and prevent anti-competitive practices that may affect bilateral trade and investment.
- Both sides will establish a joint committee to oversee the implementation of the agreement and resolve any disputes that may arise through consultations or arbitration.
Challenges and prospects of the India-EFTA trade deal
The India-EFTA trade deal has been in the works since 2009 but faced several hurdles due to differences over intellectual property rights, data security, agricultural subsidies, and market access. The negotiations were revived in 2017 after a gap of four years and finally concluded in 2024.
The trade deal is seen as a strategic move by India to diversify its trade partners and reduce its dependence on China amid the ongoing border tensions. It is also expected to pave the way for a broader free trade agreement with the European Union (EU), which has been stalled since 2013.
The trade deal will also boost India’s position in the global value chains and enhance its competitiveness in the post-pandemic world. According to Goyal, the trade deal reflects the new India that believes in the world being one family.
The India-EFTA trade deal is estimated to increase the bilateral trade between the two sides from $18.65 billion in 2022-23 to $50 billion by 2030. The investment commitment from EFTA countries will also create more jobs and spur economic growth in India.
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