EFTA Fineprint: From $100 Billion Investment Promise To Cheaper Swiss Chocolates, Watches
India inked one of three anticipated trade deals on Sunday with the European Free Trade Association (EFTA) countries of Switzerland, Norway, Iceland and Liechtenstein, ahead of India's 2024 general elections. The other two agreements are being negotiated with the United Kingdom and the middle-eastern nation of Oman.
The India-EFTA trade deal or the India-EFTA Trade and Economic Partnership Agreement (TEPA) draws significance for being the country's first trade deal with an investment aim woven into it.
India's Commerce and Industry Minister Piyush Goyal called it a 'modern, equitable and fair deal' that will include a promise to 'invest $100 billion in India from EFTA countries' and create 1 million or 10 lakh direct employment opportunities over 15 years.
It is to be noted that the investments are expected to flow in from private firms and the committment is not a governmental guarantee but a governmental initiative to nudge businesses towards investing in India.
According to the agreement document, the EFTA states will aim to increase foreign direct investment into India by $50 billion within ten years from when the deal comes into force. An additional $50 billion is expected to flow in the succeeding five years. The investments do not cover foreign portfolio investments.
Speaking at the post-signing press conference, Satya Srinivas, additional secretary with the Ministry of Commerce noted that the agreement will offer legal certainity and a ground for steady investment for businesses.
As part of the deal, a sub-committee on investment promotion and cooperation is expected to be formed with government representatives of the five countries. The agreement also calls for the establishment of an EFTA-desk to assist investors that are investing, have invested or are seeking to invest.
For India, TEPA provides an opportunity to integrate into EU markets. "Over 40% of Switzerland’s global services exports are to the EU. Indian companies can look to Switzerland as a base for extending its market reach to EU," a release on the matter clarified.
Image courtesy: Commerce ministry
According to estimates from the Global Trade Research Initiative, Switzerland accounts for 91% of bilateral merchandise trade, emerging as India’s largest EFTA trading partner.
In FY23, India’s merchandise trade with EFTA countries totalled $18.7 billion, comprising $1.9 billion in exports and $16.7 billion in imports, resulting in a trade deficit of $14.8 billion.
Of this,
Swiss exports stood at $1.346 billion while imports came in at $15.8 billion.
Norway exports accounted for $569.2 million while imports stood at $938.1 million
Iceland exports totalled $10.4 million, while imports stood at $5 million
Liechtenstein exports stood at $0.3 million, while imports came in at $2 million
"Bilateral services data suggests that Switzerland exported services worth approximately $1 billion to India in FY23, with about half the earnings stemming from Indian tourists visiting Switzerland. The details of India’s services data, however, remain unclear," GTRI noted.
The above-mentioned official release also noted that EFTA nations are offering 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 (PAP).
Meanwhile, India is offering 82.7% of its tariff lines which covers 95.3% of EFTA exports. Of this, over 80% of the import is gold and the effective duty on gold will see no change.
"Sensitivity related to PLI in sectors such as pharma, medical devices & processed food etc. have been taken while extending offers. Sectors such as dairy, soya, coal and sensitive agricultural products are kept in exclusion list," the release noted.
