India, 4-nation European bloc to ink free trade deal. Why it matters

India and the four-nation bloc European Free Trade Association (EFTA) will sign a free trade agreement on Sunday, which is likely built on a plan to attract $100 billion in investments over a period of 15 years.

The signing of the pact, officially dubbed as the Trade and Economic Partnership Agreement (TEPA), follows approval from the Union Cabinet on March 7.

The delegation that will sign the deal includes 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.

Iceland, Norway, Switzerland, and Liechtenstein are the four members of the EFTA.

WHAT DOES THE FREE TRADE AGREEMENT CONSIST OF?

An official said that India has sought an investment commitment of $50 billion during the first 10 years after the implementation of the agreement, and another $50 billion over the next five years from the bloc members, and to facilitate the generation of 1 million direct employments in India through such investments. This commitment would be linked to duty reduction under the agreement.

The agreement has 14 chapters, 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.

India and the EFTA have been negotiating the free trade pact since January 2008 to boost economic relations.

WHY IS THE FREE TRADE DEAL IMPORTANT?

Sectors related to almost all industrial goods exported from India to the EFTA are expected to benefit from the free trade agreement.

Another official said that Indian processed agricultural products may also receive greater market access in the four nations under the EFTA. Also, sectors such as pharma, medical devices and processed food items are likely to figure in the agreement.

Items such as dairy, sensitive agricultural products and soya, among others, would be kept on the exclusion list, which means no duty concessions would be provided in the agreement for these.

Under free trade agreements, two trading partners significantly cut down or omit customs duties on the maximum number of goods traded between them, besides easing norms to foster trade in services and investments.

TRADE BETWEEN INDIA AND EFTA NATIONS

India's exports to EFTA nations during 2022-2033 stood at $1.92 billion against $1.74 billion in 2021-2022. Imports aggregated at $16.74 billion during the last financial year as opposed to $25.5 billion in 2021-2022, leaving a trade deficit of $14.8 billion.

Of the four nations, Switzerland is the largest trading partner of India, followed by Norway.

India's main imports from Switzerland include gold, machinery, pharmaceuticals, cooking and steam coal, and optical instruments and orthopaedic appliances, among others. Meanwhile, major exports from India include gems and jewellery, shops and boats, machinery, certain types of textiles and apparels, and chemicals. The bilateral trade between the two countries stood at $17.14 billion in the last fiscal as against $14.45 billion in 2022-2023.

Switzerland has some of the largest pharmaceutical companies in the world, including Roche and Novartis, both of which have a presence in India.

Furthermore, India has received about $10 billion foreign direct investments (FDI) from Switzerland between April 2000 and December 2023, and is the 12 largest investor in India.

(With PTI inputs)