India formally signed a free trade agreement with the European Free Trade Association (EFTA) consisting of Iceland, Norway, Switzerland, and Liechtenstein on Sunday in New Delhi. The agreement was signed in the presence of Union Commerce and Industry Minister Piyush Goyal, and Prime Minister Narendra Modi hailed it as a “new turn” and a “watershed moment” for India and the four EFTA member nations.
“The trade agreement symbolizes our shared commitment to open, free, and equitable trade, aiming to generate growth and employment opportunities for our youth,” read a statement by Prime Minister Narendra Modi.
The agreement, officially known as the Trade and Economic Partnership Agreement (TEPA), was approved by the Union Cabinet on March 7, paving the way for its formalization. Prime Minister Narendra Modi highlighted that the pact underscores India and the EFTA’s shared commitment to prosperity and their efforts to strengthen their partnership in a more inclusive manner, aligning with the aspirations of their respective populations.
“Despite structural diversities in many aspects, our economies possess complementarities that promise mutual benefits for all nations involved. This agreement opens up significant trading and investment opportunities, reflecting a new level of trust and ambition,” PM Modi stated.
The delegation that signed the agreement included Guy Parmelin, Swiss Federal Councillor and Head of the Department of Economic Affairs, Education and Research; Bjarni Benediktsson, Minister of Foreign Affairs of Iceland; Dominique Hasler, Minister of Foreign Affairs of Liechtenstein; and Jan Christian Vestre, Minister of Trade and Industry of Norway.
Union Commerce and Industry Minister Piyush Goyal hailed the signing as a “momentous occasion,” underscoring that it marks the culmination of nearly 15 years of dedicated effort, energy, and hard work.
In an intriguing coincidence, Union Minister Piyush Goyal highlighted that the signing of the agreement coincides with the International Day of Awesomeness, which aims to spread positivity and make the world a better place. He expressed his belief that the agreement itself embodies the spirit of awesomeness.
Now, let’s delve into what the agreement entails:
The agreement is designed to attract $100 billion in investments over 15 years. Initially, India sought an investment commitment of $50 billion over the first 10 years post-implementation, with an additional $50 billion over the subsequent five years from the EFTA bloc members. The primary goal is to generate 1 million direct employments in India through these investments.
Comprising 14 chapters, the agreement covers various aspects including trade in goods, rules of origin, trade in services, investment promotion and cooperation, government procurement, intellectual property rights (IPRs), technical barriers to trade, and trade facilitation.
Now, let’s explore why this free trade deal holds significant importance:
According to a press release by the Swiss Embassy, the agreement is expected to yield vital economic benefits such as better-integrated and more resilient supply chains, creating new opportunities for businesses and individuals on both sides. It aims to bolster trade and investment inflows, employment, and economic growth.
The agreement enhances market access and simplifies customs procedures, facilitating expansion of operations for Indian and EFTA businesses in respective markets. Moreover, it seeks to foster and promote investment opportunities between the parties.
The free trade deal is regarded as a significant milestone in the relationship between the EFTA members and India. It signifies the culmination of dedicated efforts to nurture a deeper economic partnership, emphasizing the importance of dialogue, cooperation, and mutual understanding.
Now, let’s turn our attention to the sectors expected to benefit from this agreement:
Nearly all industrial goods exported from India to the EFTA are anticipated to benefit from the free trade agreement. Additionally, Indian processed agricultural products may receive greater market access in the four EFTA nations. Sectors such as pharma, medical devices, and processed food items are also likely to be included in the agreement.
However, certain items including dairy, sensitive agricultural products, and soya will be kept on the exclusion list, meaning no duty concessions will be provided for these goods.
Lastly, let’s examine the trade dynamics between India and EFTA nations:
India’s exports to EFTA nations during 2022-2023 amounted to $1.92 billion, while imports totaled $16.74 billion, resulting in a trade deficit of $14.8 billion. Switzerland emerged as India’s largest trading partner among the EFTA nations, followed by Norway.
Major imports from Switzerland include gold, machinery, pharmaceuticals, cooking and steam coal, and optical instruments, while major exports from India comprise gems and jewellery, ships and boats, machinery, textiles and apparels, and chemicals.
Switzerland houses some of the world’s largest pharmaceutical companies, including Roche and Novartis, both of which have a presence in India. Additionally, Switzerland has been a significant investor in India, with approximately $10 billion in foreign direct investments (FDI) between April 2000 and December 2023, ranking as the 12th largest investor in India.
In conclusion, the free trade agreement between India and the EFTA holds immense promise for bolstering economic ties, fostering mutual growth and prosperity, and creating new avenues for trade and investment.