India signed a landmark Trade and Economic Partnership Agreement with the European Free Trade Association, which comprises Switzerland, Norway, Liechtenstein, and Iceland on 10 March 2024.
The agreement includes binding commitment worth $100 billion over the next 15 years that is aimed to boost FDI in India and generate one million direct jobs.
Prime Minister Narendra Modi termed the agreement an entrance to new collaborations related to innovation and research: “The global leadership that EFTA countries have always demonstrated in R&D into different areas will open even newer doors of collaboration for all of us.”.
Commerce and Industry Minister Piyush Goyal said the pact is important as it is India’s first free trade agreement with four developed nations. Calling it “modern and ambitious,” Goyal said the deal balances economic asymmetries between the EFTA region and India.
EFTA states have committed $50 billion FDI in the first decade, and then another $50 billion over the subsequent five years. Goyal added that investment flow will exceed these projections, though there are provisions to plug the gaps if needed.
The agreement grants India a right to rebalance or suspend concessions if investment targets are not met. Further, it provides legal certainty in tariffs and investment relations, with investments based on a projected nominal GDP growth of 9%. This is the area of the expansion of trade and services.
The deal spans a wide array of trade concessions. EFTA has agreed to cut its tariffs on 92.2% of its tariff lines, which comprises 99.6% of Indian exports. On the other hand, India has agreed to cut its tariffs on 82.7% of its tariff lines, which accounts for 95.3% of EFTA exports.
The benefits for the Indian industries come through cheaper imports of machinery, watches, and chocolates due to duty eliminations spread over seven years. In addition, tariff concessions cover processed agricultural products and gold.
The services sector is a key focus of the agreement, with EFTA providing concessions in over 110 sub-sectors, including gaming, animation, accounting, and legal services. India has offered concessions on 105 of 156 sub-sectors, including business and health services.
The Confederation of Indian Industry (CII) has welcomed the deal, predicting it will enhance India’s export potential to EFTA markets and generate significant employment opportunities.
The agreement marks India’s fourth major trade pact in the last three years, following deals with Australia, Mauritius, and the UAE.
“This deal is a historic step in enhancing India’s global trade footprint,” Goyal said. “It integrates investment, trade, environment, intellectual property rights, and gender equality into a single framework, providing a comprehensive boost to India’s economic ties with Europe.”
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