India-EFTA Free Trade Pact - economy
NEWS: The India-European Free Trade Association (EFTA) free trade
pact, with a committed $100 billion investment flow into India.
WHAT’S
IN THE NEWS?
Overview
of the Pact
- India-EFTA
Agreement:
The free trade agreement, officially called the India-EFTA Trade and
Economic Partnership Agreement (TEPA), was signed in March 2024, marking a
significant milestone in trade relations between India and the four-member
EFTA bloc (Switzerland, Iceland, Norway, and Liechtenstein).
- Investment
Commitment:
The EFTA countries have pledged to invest $100 billion in India over a
span of 15 years, aiming to bolster bilateral trade and industrial growth.
- Job
Creation:
The proposed investments are projected to generate 1 million new jobs in
India across various sectors.
- Ratification
Timeline:
The agreement is expected to be ratified by the first quarter of 2025,
post which its implementation will begin.
Key
Investment Sectors
- Renewable
Energy:
Focused on sustainable and clean energy solutions to meet India’s growing
energy demands.
- Shipping
and Maritime:
Targeting advancements in shipping infrastructure and maritime
technologies.
- Pharmaceuticals: Strengthening the
healthcare sector with cutting-edge research and manufacturing.
- IT
and Engineering: Leveraging India’s strong IT and engineering talent to drive
innovation.
- Other
Emerging Areas: Discussions have also highlighted interest in other sectors with
potential for rapid growth.
Institutional
Mechanisms
- Purpose
and Need:
Investors face challenges related to administrative bottlenecks in India.
To address these hurdles, institutional mechanisms will be created to
provide streamlined and fast-track clearances for investment proposals.
- Timeline: These mechanisms are
planned to be finalized and operationalized once the agreement is
ratified, which is expected by early 2025.
- Structure: The mechanisms will be
designed to ensure equality and reciprocity, with identical processes for
both India and EFTA nations, fostering a collaborative environment.
Tariff
Commitments
- India’s
Commitment to Tariff Reductions:
- India
has agreed to eliminate tariffs on a wide range of products exported by
EFTA countries, including chocolates, high-end watches, bicycle parts,
smartphones, garments, and olive oil.
- These
tariff reductions aim to boost trade by making EFTA products more
competitive in the Indian market.
- Growth
Projections:
As part of the agreement, India has projected a robust annual nominal GDP
growth of 9.5% in dollar terms over the agreement’s tenure, reflecting its
commitment to sustained economic expansion.
Impact of
Switzerland’s Taxation Decision
- Double
Taxation Avoidance Agreement: Switzerland recently decided to suspend the
most-favored nation clause in its Double Taxation Avoidance Agreement with
India.
- Effect
on TEPA Ratification: This suspension is not expected to have any significant impact on
the ratification process of the India-EFTA TEPA, as clarified by reliable
sources.
Key
Diplomatic Engagements
- India-Norway
Bilateral Talks:
- Commerce
Secretary Sunil Barthwal recently met with Norway’s Trade Secretary Tomas
Norvoll to discuss enhancing trade, investment flows, and mobility for
Indian professionals.
- The
discussions also focused on reinvigorating existing institutional
frameworks and finalizing next steps for TEPA ratification.
- Strengthening
SME Links:
- The
Director General of Innovation from the EFTA side is exploring ways to
connect trade bodies and foster opportunities for small and medium-sized
enterprises (SMEs) in India.
- These
SMEs, known for their top-tier innovation, are seeking partnerships to
expand their global reach through the Indian market.
Priority
for EFTA Investments
- SME
Commitment:
EFTA nations have agreed to a $1 billion commitment specifically targeted
at medium-sized enterprises. These enterprises are seen as highly
innovative and capable of scaling their operations globally through India.
- Innovation
and Growth:
EFTA companies, particularly SMEs, consistently rank high on global
innovation indices and view India as a critical partner for scaling their
business operations.
- Fast-Track
Clearances:
Priority will be given to investments from EFTA nations under the newly
proposed institutional mechanisms, ensuring smooth and efficient clearance
processes.
Significance
of the Pact
- Economic
Boost: The
pact is expected to enhance trade and investment flows, contributing
significantly to India’s economic growth and industrial development.
- Opportunity
Creation:
The agreement opens up avenues for collaboration in high-growth sectors,
creating new opportunities for businesses and workers alike.
- Global
Market Integration: By fostering innovation-driven partnerships, the pact positions
India as a vital hub for EFTA enterprises aiming to expand their global
presence.