India, on March 10, signed a Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA), which includes Iceland, Liechtenstein, Norway, and Switzerland.
According to the agreement, the EFTA countries have committed to facilitate through private companies an investment of $100 billion in India in the next 15 years.
"The investment promise from EFTA nations is a big opportunity for pharma, medical devices, food sectors," said India's Commerce Minister Piyush Goyal in New Delhi.
"It (India, EFTA) is a modern trade agreement -- it is fair, equitable and balanced. And a win, win for all the nations involved," Goyal added.
The development comes as a win for the Indian government which was looking to push through a trade deal before the general elections slated to be held between April and May 2024. The EFTA members are not part of the European Union (EU). India is also negotiating Free Trade Agreements (FTAs) with the United Kingdom (UK), the EU, and the Gulf nation of Oman.
On the occasion of the deal being signed, Prime Minister Narendra Modi in a statement said, the global leadership of EFTA countries in innovation and Research & Development across diverse spheres such as digital trade, banking and financial services, transport and logistics, industrial machinery, bio-technology, pharmaceuticals, chemicals, food processing and clean energy, will open up new doors of collaboration.
"India will extend al possible support to EFTA countries and facilitate industry and businesses, not only to achieve the committed targets, but also go beyond them," Modi said.
"Signing an FTA with developed countries showcases India's confidence and firm commitment to trade liberalisation at a time when the whole world is turning protectionist," according to Ajay Srivastava, Founder, Global Trade Research Initiative (GTRI).
Negotiations on a broad-based Trade and Investment Agreement between the EFTA states and India were launched in January 2008, but after 13 rounds of negotiations, talks were paused in 2013.
Also Read | India-EFTA trade agreement symbolises shared commitment to fair, equitable trade: PM Modi
Talks resumed in October 2016. And, after around 21 rounds of negotiations, the trade pact between the two sides has been inked. The agreement has 14 chapters, which include areas such as goods, services, rules of origin, intellectual property rights (IPRs), and investment promotion.
Total trade between India and EFTA nations stood at around $18.66 billion in 2022-23, with the largest share belonging to Switzerland followed by Norway.
India's imports from Switzerland dropped 32.5 percent on-year to $15.79 billion in the previous fiscal, while exports fell by a much smaller 0.15 percent to $1.35 billion.
Inbound shipments from Norway at $938.06 million fell 55.17 percent in 2022-23 on a year-on-year basis and outbound shipments jumped 49.9 percent to $569.19 million.
The South Asian nation has a trade deficit with Switzerland and Norway as imports from these nations outpaced exports.
While, India's key exports to EFTA countries include organic and inorganic chemicals, drugs and pharmaceuticals, gems and jewellery, imports from these states comprise gold, pharmaceutical, watches and ships, and boats.
Investment promise
As per the trade pact inked between the two sides, the EFTA states will aim to increase foreign direct investment from investors of these nations into India by $50 billion within 10 years from the entry into force of this agreement and an additional $50 billion in the next five years.
The EFTA states will also look to facilitate generation of one million jobs within 15 years in India from the time the agreement comes into force, which would be a consequence of the commitment on foreign direct investment inflows.
"The operative word here is aim. But this is logical as governments cannot force private firms to invest in a country or project. They can only nudge," GTRI's Srivastava added.
The investment promised by EFTA states will hinge on India maintaining a nominal GDP growth rate of around 9.5 percent in US dollar terms in the next 15 years, which is in line with the South Asian nation's past growth rates, as well as on the anticipated benefits of a full implementation of the agreement, as per the trade pact signed between the two sides.
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