India is well on its way to deepening its trade relations with both the European Free Trade Association (EFTA) and the European Union (EU). Agreement is seen as a bold first step towards the liberalization of its highly state-controlled economy. The Trade and Economic Partnership Agreement (TEPA) signed with EFTA in March 2024 aims to cut tariffs on a significant portion of goods imported from member countries, which include Switzerland, Norway, Iceland, and Liechtenstein.
According to industry groups, the TEPA will eliminate tariffs on 80–85% of products from EFTA countries. This amendment will likely allow Indian exporters to reach 99% of goods in these markets duty-free. This agreement is in line with India’s wider goal of securing a Free Trade Agreement (FTA) with the UK. We hope to see this FTA come into force by 2026. India is in advanced negotiations on a free trade agreement (FTA) with the European Union, its largest trading partner in goods. In the fiscal year 2022-23, bilateral trade between the two hit a record $135 billion.
With a total of $32.4 billion in imports from EFTA countries last year, India has a lot to gain. Switzerland was responsible for almost one-third of that big number. In 2016, with a combined population of about 14 million, India’s exports to EFTA countries was just over $2 billion. The vast majority of these exports—an incredible 98%—consisted of manufactured products. The TEPA is meant to correct this imbalance to some extent by promoting greater trade and investment between India and EFTA countries.
India and EFTA have committed to investing $100 billion over the next 15 years. This ambitious undertaking is projected to generate one million green, direct domestic jobs in India. Together, these measures increase trade by billions of dollars. Beyond the immediate implications, they send a strong signal to the global market that India is serious about liberalizing its economy.
Analysts in India view this as a seminal agreement for the country. Srivastava cautions that any benefits from the agreement may not come from tariffs. Rather, they might be formed in a fashion constructive perceptions, since this will be India’s first bilateral trade agreement with a European nation. Seen through this lens, the role of reputation and credibility looms large in this intricate web of international trade realities.
An estimated 6,000 EU companies are currently established in India. In the past ten years, bilateral trade with the EU has almost doubled, highlighting India’s burgeoning economic relationship with Europe. If the TEPA is implemented successfully, it will increase India’s GDP significantly. Ongoing negotiations for a full FTA with the EU would offer even greater improvements.