India, EFTA To Sign Trade Pact On Sunday; Services Sector, Investments To Boost

India and four-nation European bloc EFTA will sign a free trade agreement on Sunday, which is likely to help promote investments and exports of key domestic services sectors such as IT, audio-visual, and movement of skilled professionals, an official said.

The European Free Trade Association (EFTA) members are Iceland, Liechtenstein, Norway, and Switzerland.

The official said that for the first time in the history of free trade agreements (FTAs), a legal commitment is expected to be included in the pact about promoting target-oriented investment from EFTA to India and creation of employment.

India has sought an investment commitment of $50 billion during the first ten years after the implementation of the agreement and another $50 billion over the next five years from the member countries of the bloc and to facilitate the generation of 1 million direct employment in India through such investments.

This commitment would be linked to duty reduction under the agreement.

Sectors related to almost all the industrial goods exported from India to the bloc are likely to benefit from the agreement.

Another official said that Indian processed agricultural products may also get greater market access in EFTA countries. Besides, sectors like pharma, medical devices and processed food (these segments are covered under the production linked incentive scheme) are expected to figure in the agreement.

Items such as soya, dairy and sensitive agricultural products would be kept in the exclusion list, meaning no duty concessions would be provided in the agreement for these items.

The signing of the pact, officially dubbed as Trade and Economic Partnership Agreement (TEPA), follows approval from the Union Cabinet on Mar. 7.

There is no official announcement of signing of the pact on Mar. 10 so far.

The agreement has 14 chapters, including trade in goods, rules of origin, intellectual property rights (IPRs), trade in services, investment promotion and cooperation, government procurement, technical barriers to trade, and trade facilitation.

From the EFTA bloc, the four ministers who may attend the signing are Guy Parmelin, Swiss Federal Councillor and Head of the Department of Economic Affairs, Education and Research; Bjarni Benediktsson, Minister of Foreign Affairs of Iceland; Dominique Hasler, Minister of Foreign Affairs of Liechtenstein; and Jan Christian Vestre, Minister of Trade and Industry of Norway.

India and EFTA have been negotiating the pact since Jan. 2008 to boost economic ties.

Commenting on the pact, economic think tank Global Trade Research Initiative said that since 98% of India's exports to Switzerland are of industrial goods and they are already entering at zero customs duties, there 'would not' be any benefit from the agreement.

"India's agricultural exports are minimal and unlikely to increase significantly due to strict quality standards and non-tariff barriers", GTRI Founder Ajay Srivastava said.

GTRI said that as per estimates, Switzerland exported services worth about $1 billion to India in 2022-23, with about half the earnings stemming from Indian tourists visiting Switzerland.

About EFTA: EFTA countries are not part of the European Union. It is an inter-governmental organisation, set up in 1960, for the promotion and intensification of free trade.

It was founded as an alternative for states that did not wish to join the European community.

EFTA has 29 free trade agreements with 40 partner countries, including Canada, Chile, China, Mexico and Korea.

INDIA-EFTA Trade: India's exports to EFTA countries during 2022-23 stood at $1.92 billion against $1.74 billion in 2021-22. Imports aggregated at $16.74 billion during the last fiscal as compared to 25.5 billion in 2021-22, leaving a trade deficit of $14.8 billion.

India-EFTA two-way trade was $18.65 billion in 2022-23 as compared to $27.23 billion in 2021-22.

Switzerland is the largest trading partner of India followed by Norway.

Switzerland is considered one of the world's most innovative economies. It had been consistently ranked number one in the Global Innovation Index.

The bilateral trade between India and Switzerland stood at $17.14 billion ($1.34 billion exports and $15.79 billion imports) in the last fiscal. In 2022-23, India's trade deficit with Switzerland was $14.45 billion.

India's main imports from Switzerland include gold ($12.6 billion), machinery ($409 million), pharmaceuticals ($309 million), coking and steam coal ($380 million), optical instruments and orthopaedic appliances ($296 million), watches ($211.4 million), soybean oil ($202 million), and chocolates ($7 million).

Major exports from India include chemicals, gems and jewellery, shops and boats, machinery, certain types of textiles and apparels.

Switzerland is the largest source of gold imports for India, with about 41% share during April-October this fiscal, followed by the UAE (about 13%) and South Africa (about 10%). The precious metal accounts for over 5% of the country's total imports.

Switzerland has some of the major pharma firms in the world and that include Novartis and Roche. Both these firms have a presence in India.

India's generic drug industry is estimated at about $25 billion and the country exports 50% of its produce.

The two-way trade between India and Norway was $1.5 billion in 2022-23.

Similarly, the bilateral commerce between India and Iceland stood at $15.36 million in 2022-23.

With Liechtenstein, India's bilateral trade aggregated at $2.26 million in the last fiscal.

Under free trade pacts, two trading partners significantly reduce or eliminate customs duties on the maximum number of goods traded between them, besides easing norms to promote trade in services and investments.

FDI from EFTA: India has received about $10 billion foreign direct investments from Switzerland between April 2000 and Dec. 2023. It is the 12th largest investor in India.

The FDI inflow was $721.52 million from Norway, $29.26 million from Iceland and $105.22 million from Liechtenstein during the period.