India and the EFTA (European Free Trade Association) countries comprising Switzerland, Norway, Iceland and Liechtenstein have inked a pact that could help India improve its investment and services ties. The EFTA bloc is India’s fifth largest trading partner after the EU, China, US and UK. EFTA is a looser formation than the EU, being neither a politically integrated bloc nor a customs union. It could be more flexible, going ahead, than the EU. However, the pact rides on a vague investment promise, with no major gains in trade in the offing.

Also read: India-EFTA pact: India to phase out import duties on chocolates, watches, textiles, smartphones

An investment of $100 billion has been promised from capital-rich EFTA over 15 years. India has the option to revoke some of its trade concessions (proportionate to the extent of the shortfall) after a review which could take about three years – in other words, only 18-20 years after the pact comes into force. However, this investment flow is predicated on India’s GDP growing at a nominal rate of 9.5 per cent over 15 years. More than 300 Swiss companies such as Nestle, Holcim, Sulzer, and Novartis, apart from banks such as UBS, operate in India. Norway’s interests lie in petroleum, shipbuilding, telecom and banking, while financial services, IT and tourism are areas of interest for all countries involved. With TCS, HCL and Infosys having their offices in EFTA countries, freer movement of professionals could open up access to the entire region. If, as reported by this newspaper, EFTA nations such as Norway take a relaxed view on movement of Indian professionals, there could be gains for India. Norway has said that there will be ‘no capping’ on entry, although explicit concessions do not figure in the agreement.

On trade, India has reduced tariffs on a range of items, but the reduction will be phased out over varying periods. However, it is worth observing whether India’s trade deficit with EFTA ($18.6 billion in total trade with India of over $22 billion in 2023) expands further. While the effective duty on gold imports from Switzerland, which at over $12 billion accounts for two-thirds of India’s trade deficit with the bloc, remains the same, the EFTA bloc sees possible trade gains arising in other areas. Switzerland, the dominant country here (a trade surplus with India of about $14.5 billion in bilateral trade of $17 billion in FY23), could export electrical machinery, engineering products, wines, watches, medical devices and pharmaceuticals. The question is whether India stands to gain in terms of market access. Here, as the Global Trade Research Initiative points out, 98 per cent of India’s exports to Switzerland are industrial products; duties here have been brought down to zero (for all exporters) from about 1.3 per cent earlier, providing no real gain. Like India, Switzerland restricts market access for farm produce.

Also read: Trade agreement to provide zero tariffs on almost all of its exports to India, says Norway

India has rightly stuck to its guns in not agreeing to ‘TRIPS plus’ or providing ‘data exclusivity’ rights to pharma MNCs. It should be wary of carbon border access, other non-tariff barriers, or entry of third country goods without value addition. But for now, the ice has been broken.