How Will The India–EFTA Trade and Economic Partnership Agreement Play Out

After more than a year of the India and European Free Trade Association (EFTA) signing the Trade and Economic Partnership Agreement (TEPA), it has finally come into effect. This marks India’s first FTA with four developed European nations. 

EFTA is an intergovernmental organization of Iceland, Liechtenstein, Norway, and Switzerland and forms an important economic bloc in Europe. TEPA commits USD 100 billion in investments and 1 million direct jobs over 15 years- also becoming the first binding pledge of its kind in any Indian FTA. The Partnership Agreement is expected to expand market access, drive manufacturing and innovation, and strengthen cooperation in technology and sustainability. 

Investing with Purpose

The agreement is crucial for India as the four EFTA states have pledged to increase foreign direct investment (FDI) in India by $50 billion within the first 10 years, followed by additional $50 billion in the next five years. Unlike portfolio inflows, these are long-term, capacity-building investments focused on manufacturing, innovation, and research. 

Over time, this investment is also expected to generate direct jobs and forge deeper linkages between the skilled labour of India and Europe’s technology ecosystems.

For India, this will translate into technology transfer, knowledge sharing, enhanced manufacturing capabilities, and integration into global value chains particularly in areas where the EFTA nations excel.

Balancing Ambition and Prudence 

EFTA has also offered tariff concessions on 92.2% of tariff lines, covering 99.6% of India’s exports including all non-agricultural goods and processed agricultural goods. 

India has also extended access to 82.7% of tariff lines, accounting for 95.3% of EFTA exports but with strong safeguards. One such safeguards includes protection of products under Make in India and the Production Link Incentive, allowing domestic industries to strengthen before full competition opens. 

This phased approach of opening the market prevents premature deindustrialization in India, especially when India is working towards a self -reliant economy (Atmanirbhar Bharat) and becoming a global manufacturing 

For EFTA nations, it also represents entry into sectors where India’s consumption is exploding, such as luxury goods, premium food products, and specialized machinery. The regulatory framework will also enable long-term business planning and investment decisions between the countries, ensuring a systematic networking rather than disruptive market flooding.

Future Outlook 

Currently, Switzerland remains India’s largest trading partner among the EFTA countries. India also runs a large trade deficit with EFTA mainly due to gold imports from Switzerland.

However, TEPA is expected to rebalance this deficit through increased exports to other EFTA nations and diversifying its trade relations with Switzerland. 

As India also gears up for a net-zero economy by 2030, EFTA’s expertise in sustainability, innovation, and clean technologies can help India with its green transition and skilling ecosystem.

Furthermore, the creation of the India EFTA-Desk as a dedicated mechanism to translate the investments under TEPA into tangible outcomes is crucial for governments and businesses in both the countries. The Desk will be a key facilitator for businesses looking to establish and expand their operations in India by guiding them through the investment process. IT will act as a single window platform for EFTA investors and facilitate connections between investors and key Indian government agencies to address business concerns efficiently and transparently.

For both countries, TEPA is more than a trade pact. It is an instrument for strategic trust in a world where geopolitical changes are shifting power and trade dynamics. By opening doors to investments, technology, sustainability, investments, TEPA captures the essence of a modern economic partnership that is ambitious, forward-looking, and balanced.