India and the European Free Trade Association (EFTA), consisting of four countries – Switzerland, Norway, Iceland and Liechtenstein have signed a historical Trade and Economic Partnership Agreement (TEPA) which aims to boost bilateral trade and investments, create jobs, and enhance cooperation among the countries.
The agreement, which was signed on 10 March 2024, is a strategic move to strengthen India's global ties and position in global value chains.
The TEPA covers a total of 14 chapters with a focus on:
- facilitating tariff concessions wide category of goods of India’s export interest like agricultural and processed food products
- providing better access for Indian professionals and service providers in IT/ITeStechnology collaboration
- commitment on investment promotion and job creation.
The agreement is expected to bring an additional investment of USD 100 billion over the next 15 years, creating 1 million direct jobs and 2 million indirect jobs in India.
The agreement benefits Indian consumers as it provides them with more choices and lower prices for quality goods and services from EFTA, such as watches, medical instruments and chocolates. It is, however, important to note that as far as India’s traditionally sensitive goods basket is concerned, the ‘Trade in Goods’ offer is similar to the one offered to Australia where although wine has been included in the offer, other sensitive lines like vehicles and other liquors have been kept out of the offer list. However, while India has reduced bound duty on ‘gold’ by 1%, it is not expected to immediately translate into increased gold imports as the trade takes place at the applicable customs duty rate and not the bound rate.
The highlights of the agreement are:
- EFTA has committed to promote investments with the aim of increasing the stock of foreign direct investments (FDIs) by USD 100 billion in India. The investments do not cover foreign portfolio investment.
- EFTA has offered 92.2% of its tariff lines which covers 99.6% of India's exports. The EFTA's market access offer covers 100% of non-agri products and tariff concession on processed agricultural products.
- India has committed rationalisation of 82.7% of its tariff lines which covers 95.3% of EFTA exports (of which more than 80% of import in India is gold).
- India has offered tariff concessions to the EFTA countries on various products such as coal, medicines, dyes, textiles, apparels, iron and steel, fish oil, cocoa, malt, instant tea, machinery, bicycles, clocks, watches, olives, avocado, apricot, coffee, caramel, chocolate, medical equipment, smartphones, sugar, and cut and polished diamonds.
- The tariff concessions are phased over different periods ranging from immediate elimination to 10 years, depending on the product and the sensitivity of the domestic industry.
- Switzerland, the largest trading partner of India among the EFTA countries, has granted duty-free access to 98% of India's exports of industrial products, which includes gems and jewellery, chemicals, pharmaceuticals, and engineering goods.
- However, Switzerland has excluded most agricultural products such as dairy, honey, vegetables and cereals from the tariff concessions, limiting the market access for India's exports of these items.
- In the Services sector, the commitments secured by India would encourage the export of services in key sectors – IT services, business services, personal, cultural, sporting and recreational services, other education services, audio-visual services etc.
- Services offers from EFTA also include better access through digital delivery of Services (Mode 1), commercial presence (Mode 3) and improved commitments and certainty for entry and temporary stay of key personnel (Mode 4), in addition to provisions for Mutual Recognition Agreements in Professional Services like nursing, chartered accountants and architects.
While the TEPA brings in the first instance in India’s FTAs towards promoting target-oriented investment and creation of jobs, it is also expected to create new opportunities for Indian exporters, professionals, and service providers in sectors such as textiles, leather, gems and jewellery, chemicals, pharmaceuticals, engineering, information technology, health, education, tourism, and transport.
The agreement signals India's engagement with the developed nations which leads to the diversification of trade partners, and demonstrates the country’s commitment to a rules-based multilateral trading system.
For detailed texts of the agreement, please refer - Trade and Economic Partnership Agreement between the Government of the Republic of India and the Governments of EFTA States
