$100 billion FDI, 1 million jobs to cheaper Swiss watches, chocolates — India-EFTA pact kicks in today

If the EFTA nations fail to meet their investment commitments, India retains the right to temporarily revoke customs duty concessions granted under the agreement

India's free trade agreement (FTA) with the four-nation European Free Trade Association (EFTA) officially comes into effect today. The pact is expected to strengthen bilateral trade and investment flows between India and the EFTA bloc, which includes Iceland, Liechtenstein, Norway, and Switzerland. The agreement was originally signed on March 10, 2024.

What is an FTA?

A free trade agreement is a pact between countries where they agree to eliminate or reduce tariffs on most goods traded among them. FTAs also aim to ease trade barriers, simplify regulations, and encourage services exports and investment. Globally, more than 350 FTAs are currently active, with many nations participating in multiple agreements.

Key Benefits for India

Under this pact, India is set to receive $100 billion in investment over the next 15 years. These inflows are expected to create 1 million direct jobs in the country. Importantly, this commitment focuses on long-term productive investments rather than short-term portfolio investments.

If the EFTA nations fail to meet their investment commitments, India retains the right to temporarily revoke customs duty concessions granted under the agreement. The investment schedule calls for $50 billion in the first 10 years and the remaining $50 billion over the next five years, with a three-year grace period to meet obligations.

Trade Pact Components

EFTA concessions: 92.2% of tariff lines covering 99.6% of India's exports, including all non-agricultural goods and processed agricultural products.

India's offer: Covers 82.7% of EFTA tariff lines (95.3% of EFTA exports), with gold imports from Switzerland largely unaffected.

Sensitive Sectors

Certain sectors remain protected under the pact, including pharmaceuticals, medical devices, processed foods, dairy, soya, coal, and select agricultural products.

Indian Export Opportunities

Indian exporters in machinery, organic chemicals, textiles, leather, gems & jewellery, and processed foods will enjoy reduced duties, lowering costs and improving access to EFTA markets.

Country-Specific Gains for India:

• Switzerland: Food preparations, confectionery, biscuits, fresh grapes, nuts, vegetables, coffee.
• Norway: Food preparations, condiments, rice, processed vegetables/fruits, biscuits, malt extracts, beverages, coffee.
• Iceland: Processed foods, chocolates, confectionery, fresh/chilled vegetables.

Indian consumers will see cheaper Swiss wines, watches, and chocolates. Wine duties will be cut in phased instalments over 10 years, depending on price categories. Other tariffs will reduce to zero at varying intervals:

5 years: Cod liver oil, fish body oil, smartphones.

7 years: Tuna, salmon, olive oil, cocoa, machinery, watches, bicycles.

10 years: Olives, avocado, apricot, coffee, chocolate, most medical equipment.

Sugar: 50% tariff reduction over 10 years.

Gains for Indian Services Sector

India has committed to 105 service sub-sectors, while gaining improved access in 128 sectors from Switzerland, 114 from Norway, 107 from Liechtenstein, and 110 from Iceland.

India's FTA Record

India has signed trade agreements with countries and regions including Sri Lanka, Bhutan, Thailand, Singapore, Malaysia, South Korea, Japan, Australia, UAE, UK, Mauritius, and the 10-nation ASEAN bloc. Since 2014, five new FTAs have been inked with Mauritius, UAE, Australia, EFTA, and the UK, bringing India's total to 16 active trade agreements.

Additionally, India is negotiating new deals with partners such as the US, Oman, the EU, Peru, Chile, New Zealand, and Israel.

(With inputs from PTI)