India on Sunday finally signed the trade agreement with the European Free Trade Association (EFTA), a bloc of four European countries, 15 long years after the negotiations started. Even though the four countries—Switzerland, Norway, Liechtenstein and Iceland—account for just 1.6 percent of India’s total trade at present, it is a significant milestone as it is for the first time India is entering into trade agreement with four developed nations from Europe. It shows India’s growing confidence as an economy and its commitment towards free trade. We have already signed trade pacts with Australia and the UAE, and are looking to seal the deal with the UK.
The EFTA trade talks began in 2008, were suspended in 2013 and then restarted in 2023. The agreement is a milestone even if its significance in terms of access to goods in that market remains limited. The EFTA is offering market access to all non-agricultural products from India and tariff concession on processed agricultural products. India is offering access to 95.3 percent of EFTA exports, of which more than 80 percent by value is gold. Sectors such as dairy, soya, coal and sensitive agricultural products have been excluded. The agreement does not have a significant impact on India’s trade with the EFTA bloc. Switzerland, the biggest trade partner for India within the bloc, eliminated import duties on all industrial goods for all countries from January 1, 2024. This directly affected 98 percent of India’s merchandise exports to the country. The agreement also leaves the effective duty on gold untouched.
Yet, the pact is significant as it allows Indian professionals access to these four countries. The deal has mutual recognition agreements in professional services such as nursing, chartered accountancy and architecture. One of the highlights of the pact is that it envisages the foreign direct investment by the EFTA countries into India growing to $100 billion in 15 years. It also talks about facilitating the generation of a million jobs in India through such investments. These investments would be over and above the foreign portfolio investment. These are long-term goals and it remains to be seen how the governments in these countries can nudge private companies to invest in India.