Union Minister for Commerce & Industry Piyush Goyal during the signing of the India-European Free Trade Association (EFTA) Trade & Economic Partnership Agreement, in New Delhi, Sunday, March 10, 2024.
PTI Photo
The conclusion of a trade agreement with a bloc of four European countries — Switzerland, Iceland, Liechtenstein, Norway — marks an important event for India’s trade relations. It is at the same time an affirmation of a positive view of multilateral, or perhaps more accurately ‘mini-lateral’, trade deals, and a model for bigger deals to come. India had not actively pursued trade agreements as a matter of policy, but the changing economic and trade scenarios in the world and the stalemate in the World Trade Organisation (WTO) negotiations may have led the country to take a fresh look at the policy. The agreement with the four countries, known as the European Free Trade Association (EFTA), has been in the works for over 15 years. Though small, they are high-income countries and, together as a bloc, constitute India’s fifth-largest trading partner, after the European Union, China, the United States and the United Kingdom. So the agreement is of high value to both sides.
The highlight of the agreement is the EFTA’s stated goal to increase Foreign Direct Investment (FDI) into India by $50 billion within 10 years, and another $50 billion in the five years thereafter, which could generate one million jobs in the country. The investment flow is tied to 9.5% nominal GDP growth in India for 15 years and some tariff concessions on a chunk of their exports to India. Indian service firms and professionals will get greater market access to these countries. Every one of these countries has a strong point. Switzerland, Norway and Liechtenstein have highly developed financial sectors and Iceland has well-developed tourism and fisheries sectors. India has a trade deficit with Switzerland mainly because of gold imports. The agreement will lead to the “elimination of duties on most industrial goods exported to India”, such as pharmaceutical products, machinery and watches. Swiss wines and chocolates will get cheaper in India.
India has offered “82.7% of its tariff lines which cover 95.3% of the group’s exports”. But most agricultural items are outside the purview of the deal and the EFTA’s market access offer covers 100% of non-agricultural products. The financial sector expertise and technology leadership of these countries can be deployed on a wide scale in India to the benefit of both sides. India has an ambitious target of $2 trillion in exports of goods and services by 2030. Trade agreements will have an important role in achieving it. India has recently signed a major trade deal with the UAE and an interim agreement with Australia. Bigger deals with the EU and the UK are under negotiation. The EFTA is important in that context. It may be said to be a trade deal for a re-globalising world, from India’s viewpoint.