India, EFTA ink free trade agreement; USD 100 bn investment commitment in next 15 yrs

New Delhi: India and the four-nation European bloc EFTA on Sunday signed a free trade agreement under which New Delhi received an investment commitment of USD 100 billion in 15 years from the grouping while allowing several products such as Swiss watches, chocolates and cut and polished diamonds at lower or zero duties.

The European Free Trade Association (EFTA) members are Iceland, Liechtenstein, Norway, and Switzerland.

The bloc committed an investment of USD 100 billion -- USD 50 billion within 10 years after the implementation of the agreement and another USD 50 billion in the next five years - which would facilitate the creation of 1 million direct jobs in India. This is a first-of-its-kind pledge agreed upon in any of the trade deals signed by India so far.

The commitment is the key substance of the TEPA (Trade and Economic Partnership Agreement), which took almost 16 years to conclude, for India in return for opening its markets for several products coming from the EFTA nations.

Prime Minister Narendra Modi said the signing of the trade agreement between India and the four-nation European bloc EFTA is a "watershed moment" as it symbolises a shared commitment to open, fair and equitable trade.

"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," Federal Councillor Guy Parmelin, speaking on behalf of the EFTA member states, said.

The biggest trading partner of India in the bloc is Switzerland, which already has zero customs duties on almost all industrial goods. Due to this, the Swiss side cannot offer anything in the goods category and the agri sector, there are sensitivities for them.

India has low trade volumes with the remaining three countries. India would get duty concessions on processed agricultural products.

"It is for the first time in the history of FTAs, a binding commitment of USD 100 billion and one million direct jobs in the next 15 years has been given," Commerce and Industry Minister Piyush Goyal said.

As the investments will be made by the private sector firms of the EFTA nations, the agreement will facilitate it by providing legal certainty in terms of tariff regime and terms of regulations and this certainly is prompting them to come forward and invest, Additional Secretary in the Ministry of Commerce L Satya Srinivas told reporters.

An official said that there is a provision in the agreement that if the proposed investments would not come because of some reasons, India can "re-balance or suspend" the duty concessions to the four countries.

India is offering 82.7 per cent of its tariff lines or product categories, which covers 95.3 per cent of EFTA exports of which more than 80 per cent of imports are gold.

On gold, India has not touched the effective customs duty (15 per cent) but reduced the bound rate by 1 per cent to 39 per cent, which will not have any implication on imports.

India will also provide duty concessions on certain production-linked incentive sectors like pharma, medical devices and processed food. Sensitivities related to these sectors have been kept in mind while extending offers. Sectors such as dairy, soya, coal and sensitive agricultural products are kept on the exclusion list and there will not be any duty concessions on these goods.

Domestic customers will get access to high-quality Swiss products such as watches, chocolates, biscuits, and clocks at lower prices as India will phase out customs duties under the trade pact on these goods over 10 years.

In the services sector, the commerce ministry said, India has offered 105 sub-sectors to the EFTA like accounting, business services, computer services, distribution and health. On the other hand, the country has secured commitments in 128 sub-sectors from Switzerland, 114 from Norway, 107 from Liechtenstein, and 110 from Iceland.

Segments where Indian services will get a boost include legal, audio-visual, R&D, computer, accounting, and auditing.

According to the ministry, India's interests in generic medicines and concerns related to the evergreening of patents have been fully addressed.

Further, the pact would provide an opportunity for domestic exporters to integrate into EU (European Union) markets. Over 40 per cent 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 the EU.

It will also facilitate technology collaboration and access to world-leading technologies in precision engineering, health sciences, renewable energy, Innovation and R&D.

It will take up to a year to implement the agreement due to an elaborate ratification process of these pacts in different countries.

The agreement has 14 chapters, including trade in goods, rules of origin, intellectual property rights (IPRs), trade in services, investment promotion and cooperation, government procurement, technical barriers to trade and trade facilitation.

Jan Christian Vestre, Minister of Trade and Industry of Norway said 113 Norwegian companies are operational in India and many more are keen to come. The Climate Investment Fund and sovereign wealth fund have substantial investments in India.

"We will open an EFTA office in India to assist companies wanting to invest here," Vestre said.

Under TEPA, Norway will be bringing down tariffs on 98 per cent of Indian exports to zero in the next five to 10 years.

TEPA is the 14th trade deal that India has signed with individual countries and regional blocs. TEPA is the first trade agreement with developed countries from the Western Hemisphere.

This will be the fourth agreement of the Modi-led government. India signed pacts with Mauritius, the UAE and Australia. Talks are at an advanced stage with the UK, Oman and Peru for FTAs.

India-EFTA two-way trade was USD 18.65 billion in 2022-23 (of this, USD 17.14 billion with Switzerland) compared to USD 27.23 billion in 2021-22. The trade deficit was USD 14.8 billion in the last fiscal.