How India-EFTA trade agreement boosts ‘Make in India’ initiative

Amid rising protectionism and geoeconomic instability worldwide, India’s partnership with the European Free Trade Association (EFTA) presents a vital opportunity for economic diversification and growth.  

As EFTA countries –  Switzerland, Norway, Iceland, and Liechtenstein – excel in advanced technologies across renewable energy, precision engineering, and financial services, they offer strategic growth opportunities for India’s innovation-driven economy.

Therefore, to deepen economic ties and boost trade and investment with the EFTA, India has inaugurated a dedicated desk at Bharat Mandapam, New Delhi, on February 10, 2025. The EFTA desk is set to play a crucial role in transforming opportunities into tangible results by serving as a critical resource at the intersection of businesses.  

But what are the major opportunities and challenges in the road ahead for the India-EFTA Trade and Economic Partnership Agreement (TEPA)? Let’s explore. 

A new era of partnership 

The creation of the EFTA desk is testimony to the fact that this is not just a transactional trade agreement to expand market access, but a significant step towards deeper collaboration between like-minded actors, built on shared values, and a commitment to long-term cooperation and mutual growth. 

The desk will serve as a centralised platform to facilitate investment from EFTA countries and assist companies looking to expand in India. It will also be responsible for providing insights into the Indian market, regulatory guidance, financial and business services, an understanding of domestic policies, and coordinated assistance for navigating India’s investment landscape. 

By enabling collaboration across key sectors that facilitate India-EFTA trade, this desk has immense potential to attract imports and investment. Even before the TEPA comes into force, the two sides are gearing up to leverage reduced tariffs, regulated customs procedures, enhanced market access, and a suitable framework for sustainable trade practices. 

India’s Strategic Shift with EFTA Partnership

These efforts came in the wake of India’s landmark Trade and Economic Partnership Agreement or TEPA with the EFTA member states, which was concluded on March 10, 2024. The EFTA was founded in 1960 by Austria, Denmark, Portugal, Norway, Sweden, Switzerland and the United Kingdom (UK). 

Over the years, Denmark and the UK left the bloc in 1972, followed by Portugal in 1985 to join the European Economic Community (EEC). Sweden and Austria exited in 1995 to become part of the European Union. 

While the remaining four EFTA members have continued to promote closer economic cooperation and trade ties both within and outside of Europe, their partnership with India marks a historic first. It is for the first time in the history of Free Trade Agreements (FTAs) that EFTA’s partnership with India includes a legally binding commitment to promote target-oriented investment and job creation.

The trade deal with India, signed after 21 rounds of negotiations that commenced in 2008, is expected to come into force by the end of this year. The agreement has committed the EFTA nations to invest $100 billion in India. It aims at generating 10 lakh jobs over the course of 15 years in exchange for enhanced market access to the EFTA for their pharmaceuticals, chemical products, minerals, and other goods at lower or zero duties. 

In light of rising protectionism along with geoeconomic instability, this partnership is likely to help India diversify its imports, particularly by reducing its dependence on China. The economic ties between the four EFTA member states and India hold immense potential. 

Strengthening ‘Make in India’ initiative

This potential is reflected in the consistent growth of India-EFTA trade, which increased from $18.65 billion in 2022-23 to $24 billion in 2023-24, with the trade balance in favour of the bloc. Notably, India’s bilateral relations with the individual EFTA countries have also gained significant momentum.

A case in point is Switzerland’s precision technology playing a pivotal role in India’s moon mission. Switzerland is India’s largest trading partner among the four EFTA nations and has directed up to $10.72 billion in foreign direct investment into India between April 2000 and September 2024. 

With the agreement coming into force, Norwegian and Icelandic expertise in renewable energy could play a key role in India’s clean energy transition. Norway can also offer collaboration opportunities in green mobility, the circular economy, the blue economy, shipbuilding, and seafood industries. 

Norway’s $1.6 trillion sovereign wealth fund – the world’s largest pension fund – has been growing exponentially and recorded a profit of $213 billion in 2023 owing to strong returns on its technology investments. It presents a promising incentive for the Indian economy. 

Further, India is expected to attract investment flows into the pharmaceutical, chemical, food processing, and engineering sectors through the establishment of Joint Ventures in these domains. By easing trade and investment, the India-EFTA TEPA is likely to help diversify global value chains, majorly in the fields of industrial products and services, while also giving an impetus to India’s ‘Make in India’ initiative. 

Navigating challenges

However, despite the agreement’s potential for mutual benefits, certain challenges persist. Regulatory disparities and imbalances in market access are some of the challenges faced by the partnership. Moreover, the agreement may favour EFTA exports to India more than Indian exports to EFTA countries, primarily due to existing tariff structures. 

Although India’s trade deficit has declined over the last decade – from $31.74 billion in 2012-2013 to $14.8 billion in 2022-23 – concerns remain that tariff reduction under the agreement may widen the trade deficit. 

In addition, different standards of product quality, environmental regulations and safety provisions between India and EFTA countries could also lead to complexities in business compliance. Further, India has excluded the agriculture and dairy sectors from significant tariff reductions, limiting benefits for some EFTA exporters. 

Finally, disparities in intellectual property rights (IPR) protection standards remain a concern, particularly in terms of data exclusivity proposed by EFTA nations, which could create hurdles in the future. 

However, linking trade and investment with India’s domestic needs may help address domestic opposition and create a favourable climate of investment. Bridging regulatory gaps through the reduction of non-tariff barriers and establishing joint technical committees can help streamline consistent trade. Further, capacity building through infrastructure development and skill upgradation can strengthen the agreement and help channelise resilient value chains, attractive investment, and the creation of jobs. 

While this is just the beginning of a solid partnership, there is a commitment from both sides to unlock new opportunities, drive ambition and innovation, and ensure sustainable growth and economic prosperity. Given the volatile geopolitical landscape and the complexities of market access and regulations – evident in the delays of the India-EU FTA and India-UK FTA – TEPA proves to be a valuable development in India’s economic growth. It aligns with the country’s long-term mission of achieving the developed nation status, Viksit Bharat, by 2047.

Post Read Questions

What is the significance of the Trade and Economic Partnership Agreement (TEPA) between India and EFTA?

What are the expected economic benefits of the TEPA for India, particularly in terms of job creation? What sectors are expected to benefit from the trade deal between India and EFTA?

In what ways might the TEPA help India diversify its imports and reduce dependence on China?

What are the potential challenges India may face in balancing trade benefits under TEPA?

What challenges does rising protectionism and geoeconomic instability pose for international trade agreements like TEPA?

(Shreya Sinha is a Research Associate [Europe Desk] at Vivekananda International Foundation, New Delhi.)

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