India wins $100 billion investment pledge in EFTA trade deal

India and four European countries signed a free trade pact that will see $100 billion invested in the South Asian country over 15 years and a million jobs created, boosting Prime Minister Narendra Modi’s government weeks before the elections.

Indian Trade Minister Piyush Goyal said Sunday the deal with the European bloc — which comprises Switzerland, Norway, Iceland and Liechtenstein — marked the “first time in the history of the world that we are inking an agreement with a binding commitment” for investment within a trade pact. 

It shows that “investor confidence in India is at an all-time high,” he added.

The trade pact with the EFTA bloc, which includes countries that aren’t members of the European Union, has been under negotiation for 16 years. Bloomberg News had earlier reported on the agreement.

India, the world’s most populous nation and the fastest-growing major economy, is benefiting as countries look to diversify their supply chains away from China. Goyal said the investment commitments from the EFTA countries would be from the private sector.  

“The EFTA trade deal continues to deepen market access for India, with an added clause for incentivizing investment,” said Rahul Bajoria, an India economist at Barclays Plc. Although the EFTA nations’ market size is small, the agreement is a “signal nevertheless that even highly developed economies are seeking trade deals with India,” he said. 

The European nations will in return get easier access for processed food and beverages and electrical machinery.

India offers “immense opportunity for trade and investment,” Swiss Economy Minister Guy Parmelin said at the ceremony, adding that the South Asian nation would gain access to technology through the deal. 

The agreement will also benefit the pharmaceutical and medical devices industry of the bloc. Indian exporters will get liberalized access for their rice and other products to these European nations while high-end Swiss watches will become cheaper in India in a phased manner. 

‘Significant Milestone’

The Swiss government called the the deal a “significant milestone,” in a separate statement on Sunday. India will lift or partially remove customs tariffs on about 95% of industrial imports from Switzerland, excluding gold, either immediately or over time, it said. In a nod to the Swiss pharmaceuticals industry, the government said the deal includes “improvements” to intellectual property rights, patent procedures and the protection of “Swissness.”

The services sector will also benefit from the deal and Indian professionals will be able to move more smoothly under the arrangement. The EFTA bloc has committed to market access and non-discriminatory treatment for Indian services including in the audio-visual, accounting and auditing, legal and computer-related sectors under the pact. 

India has offered market access and non-discriminatory treatment to the accounting, health, computer, banking and insurance services of the bloc. Goyal said the free trade deal is India’s most modern agreement to date, dealing with labor, environment and gender. 

Modi’s government has accelerated talks with major trading partners to take advantage of the changing global world order. It is also in discussions with the UK, European Union and Australia for free trade pacts to boost local manufacturing and create jobs. Negotiations with the UK are in the final stages.

Among the EFTA countries, Switzerland is India’s largest commercial partner and bilateral trade stood at $17.14 billion in the 2022-23 fiscal year, out of $18.66 billion with the whole group.

The deal must be ratified by Switzerland’s parliament, which will begin that process immediately, the government said, so it can be approved by 2025 at the latest. Parmelin will brief the media on the pact in the Swiss capital Bern on Monday upon his return. 

Swissmem, an engineering industry lobby group whose members include conglomerate ABB Ltd. and elevator maker Schindler Holding AG, said the deal represents an “enormous opportunity.” it gives Swiss companies an advantage over competitors from the UK, China and the US who can’t take advantage of such a free-trade deal, the group said.