India is set to receive $100bn-worth of investment from the four European Free Trade Association (EFTA) countries under the terms of their free trade agreement (FTA) signed on March 10. 

The investment from the EFTA — which consists of Switzerland, Norway, Iceland and Liechtenstein — will flow over a 15 year period. 

“This is the first time … that we are inking a free trade agreement with a binding commitment to invest $100bn in India,” the Asian country’s minister of commerce and industry, Piyush Goyal, said at a press conference announcing the India-EFTA Trade & Economic Partnership Agreement (TEPA). 

The 70-page agreement states that the first $50bn should be invested within 10 years of TEPA coming into force (which is expected in early 2025) and the next $50bn in the five years thereafter. It aims to generate 1 million jobs in India over the same timeframe. 

“From India's perspective, the execution of TEPA is a landmark achievement as it is set to bring in significant economic benefits, such as better integrated and more resilient supply chains, new opportunities for businesses and individuals on both sides, leading to increased trade and investment flows, job creation and economic growth,” says Nivruti Rai, CEO of Invest India.

According to fDi Markets, the four TEPA countries — all of which are outside the EU — have announced $20.3bn in greenfield foreign direct investment (FDI) in India since records began in 2003. Switzerland is the source of $17.7bn of that, followed by Norway with $2.5bn. The biggest sector recipients have been building materials, metals, industrial equipment and food and beverages. 

TEPA does not identify which sectors will be targeted for FDI. However it requires the signatories to co-operate in areas that mutually benefit their economies, including through partnerships in fields such as Stem, healthcare, biotechnology, digital technology, clean technology and sustainable metal making. Ms Rai highlights potential for investment in infrastructure, manufacturing, pharmaceuticals and financial services

The agreement follows a record year for FDI in the world’s fastest-growing large economy. Data from fDi Markets shows that India recorded $85.2bn-worth of capital expenditure commitments across 1009 projects, beating previous records for project numbers and values.

Under TEPA’s trade provisions, both parties will eliminate customs duties on fish plus most industrial goods including pharmaceuticals, machinery, watches, fertilisers, chemical products and minerals. EFTA countries collectively comprise India’s fifth biggest trade partner, after the EU, US, UK and China, according to its government.

“TEPA is a win-win situation for both EFTA and India. Huge new opportunities open up for trade, which otherwise seemed very distant,” says Udyen Jain, managing partner of  UJA Global Advisory in Pune. He highlights consumer products as having particular promise for EFTA explorers, considering India’s population of 1.4 billion people.  

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India opening up

TEPA was signed after 21 rounds of negotiations over 16 years, and comes amid India’s gradual liberalisation of some of its protectionist trade policies. 

The Narenrda Modi government and its predecessors have used tariffs to protect local industries and encourage self-sufficiency within the world’s most populous country. In 2020 it declined joining the Regional Comprehensive Economic Partnership, which fosters integration among 15 Asian-Pacific countries and created the world’s second biggest trade bloc after the EU. 

However, 2022 marked a turning point. That year India signed FTAs with both Australia, its sixth biggest trade partner, and the UAE. The agreement with the Gulf state aims to boost non-oil bilateral trade from $60bn to $100bn by 2030. 

Also in 2022, India resumed FTA negotiations with the EU — a process that started in 2007 but had stalled since 2013 — and started FTA talks with the UK. The Modi government recently completed the 14th round of negotiations with the UK government.

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