'Watershed moment': PM as India seals free trade agreement with European bloc

India on Sunday signed a free trade agreement with the four-nation European Free Trade Association (EFTA) in New Delhi, in the presence of Union Commerce and Industry Minister Piyush Goyal.

Prime Minister Narendra Modi called the deal with the European bloc a "new turn" and a "watershed moment" for India and Iceland, Norway, Switzerland, and Liechtenstein - the four members of the EFTA.

"The trade agreement symbolises our shared commitment to open, free, equitable trade, as well as generating growth and employment for the youth," a statement by PM Modi read.

The deal, officially dubbed as the Trade and Economic Partnership Agreement (TEPA), happened after approval from the Union Cabinet on March 7. The Prime Minister said the pact emphasises India and the EFTA's "steadfast commitment to shared prosperity and our drive to cultivate a stronger, more inclusive partnership between India and EFTA, furthering the aspirations of our people".

"Despite structural diversities in many aspects, our economies possess complimentarities that promise to be a win-win situation for all nations. With the opening of enormous trading and investment opportunities, we have reached a new level of trust and ambition," PM Modi's statement added.

The delegation that signed the deal included 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.

Piyush Goyal called the signing a "momentous occasion" and said it marks the "culmination of nearly 15 years of hard work, tremendous energy, and effort".

"Today is also, incidentally, the International Day of Awesomeness. I heard about it for the first time today. It's supposed to spread positivity, make the world a better place, and I think, what could be more awesome than this?" the Union Minister added.

WHAT DOES THE AGREEMENT CONSIST OF?

The agreement is likely made with the plan to attract $100 billion in investments over a period of 15 years. Earlier to the signing, an official said India had sought an investment commitment of $50 billion during the first 10 years after the implementation of the agreement, and another $50 billion over the next five years from the bloc members, and to facilitate the generation of 1 million direct employments in the country through such investments.

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

WHY IS THE FREE TRADE DEAL IMPORTANT?

A press release by the Swiss Embassy said the agreement is set to bring vital economic benefits such as "better integrated and more resilient supply chains, new opportunities for businesses and individuals on both sides", aiding in improved trade and investment influx, employment, and economic growth.

"The agreement enhances market access and simplifies customs procedures, making it easier for Indian and EFTA businesses to expand their operations in the respective markets. The agreement further aims to facilitate and promote investment opportunities between the parties," the release further stated.

The Embassy added that the free trade deal marks an important "milestone" in the relationship between the EFTA members and India. "It reflects the culmination of dedicated efforts to foster a deeper economic partnership, underscoring the importance of dialogue, cooperation, and mutual understanding," it said.

Sectors related to almost all industrial goods exported from India to the EFTA are expected to benefit from the free trade agreement.

Earlier, an official said that Indian processed agricultural products may also receive greater market access in the four nations under the EFTA. Also, sectors such as pharma, medical devices and processed food items are likely to figure in the agreement.

Items such as dairy, sensitive agricultural products and soya, among others, would be kept on the exclusion list, which means no duty concessions would be provided in the agreement for these.

Under free trade agreements, two trading partners significantly cut down or omit customs duties on the maximum number of goods traded between them, besides easing norms to foster trade in services and investments.

TRADE BETWEEN INDIA AND EFTA NATIONS

India's exports to EFTA nations during 2022-2033 stood at $1.92 billion against $1.74 billion in 2021-2022. Imports aggregated at $16.74 billion during the last financial year as opposed to $25.5 billion in 2021-2022, leaving a trade deficit of $14.8 billion.

Of the four nations, Switzerland is the largest trading partner of India, followed by Norway.

India's main imports from Switzerland include gold, machinery, pharmaceuticals, cooking and steam coal, and optical instruments and orthopaedic appliances, among others. Meanwhile, major exports from India include gems and jewellery, shops and boats, machinery, certain types of textiles and apparels, and chemicals. The bilateral trade between the two countries stood at $17.14 billion in the last fiscal as against $14.45 billion in 2022-2023.

Switzerland has some of the largest pharmaceutical companies in the world, including Roche and Novartis, both of which have a presence in India.

Furthermore, India has received about $10 billion foreign direct investments (FDI) from Switzerland between April 2000 and December 2023, and is the 12 largest investor in India.

(With PTI inputs)