The Trade and Economic Partnership Agreement (“TEPA”) between India and the four-nation European Free Trade Association (“EFTA”) bloc (comprising Switzerland, Norway, Iceland, and Liechtenstein) stands as a landmark achievement in India’s evolving trade diplomacy. Signed in March 2024 and operational from October 1, 2025, the pact with EFTA is a comprehensive free trade agreement that goes far beyond traditional tariff reduction. It is India’s first agreement with a major European economic grouping and is uniquely structured to link market access with a binding commitment on foreign investment.
This article provides a detailed background of the TEPA, dissects its economic impact, critiques its advantages and disadvantages, and examines its strategic significance in the current global economic climate.
The Pact and its Core Commitments: An Unprecedented Template
The India-EFTA TEPA is the culmination of 21 challenging rounds of negotiations that spanned over 16 years, signalling the complexity of aligning interests between India, a developing economic powerhouse, and the EFTA States, known for their high-income, high-tech economies and strict regulatory standards.
The agreement is broad-based, covering 14 chapters across trade in goods, trade in services, investment, intellectual property rights (“IPR”), and sustainable development. Its two most critical pillars are market access and a binding investment guarantee.
EFTA has offered significant concessions, eliminating or reducing duties on 92.2% of its tariff lines, covering almost all (99.6%) of India’s exports, including 100% of non-agricultural products. In return, India has reciprocated by eliminating or reducing tariffs on 82.7% of its tariff lines, covering 95.3% of EFTA exports. And before we begin jumping to conclusions, it ought to be highlighted here that India has strategically kept sensitive sectors like dairy, soya, and specific agricultural products on an exclusion list to protect domestic producers.
The most ground-breaking feature of TEPA is the explicit commitment from the EFTA States to promote USD 100 billion in Foreign Direct Investment (“FDI”) into India over the next 15 years, with the aim of facilitating the creation of one million direct jobs. This target is split into USD 50 billion over the first ten years and another USD 50 billion in the subsequent five. The agreement includes a unique provision allowing India to re-balance or suspend the tariff concessions if the investment objective is not met, a mechanism unprecedented in India’s major trade pacts.
The Economic Calculus: Impact and Analysis
The TEPA is poised to generate significant, yet measured, changes in the structure of India’s trade and investment.
The primary economic gain for India lies in securing preferential access for its key labour-intensive sectors which is a critical component of India’s manufacturing strategy. Goods like textiles, apparel, leather products, gems and jewellery, processed foods, and marine products will face dramatically lower or zero tariffs, making them immediately more competitive against rivals in the EFTA markets.
So far as the services sector is concerned, the agreement provides enhanced market access and improved mobility for Indian professionals across 105 sub-sectors offered by India and secured commitments in over 100 sub-sectors from each EFTA member. This facilitates easier access for Indian IT, financial, accounting, and legal services to high-value European markets.
Most notably, the USD 100 billion investment commitment is the game-changer. Given that EFTA countries, particularly Switzerland and Norway, are global leaders in precision engineering, pharmaceuticals, high-tech manufacturing, and renewable energy, this capital is expected to bring with it state-of-the-art technology, sophisticated business practices, and knowledge transfer. This infusion is vital for upgrading India’s domestic manufacturing capabilities, aligning perfectly with the ‘Make in India‘ and ‘Atmanirbhar Bharat‘ initiatives, and contributing significantly to the creation of one million high-quality direct jobs.
Further, by reducing tariffs on many EFTA exports, including specialized machinery, advanced chemicals, and some medical devices, the pact will lower the cost of capital and high-quality inputs for Indian manufacturers, which is expected to improve the overall competitiveness of the Indian industry. For the Indian consumer, the pact promises access to premium goods like Swiss watches, chocolates, and specific beverages at potentially lower prices due to reduced import duties.
A Critical Lens: Advantages and Disadvantages
The compelling advantages of India’s TEPA with EFTA States are: (a) guaranteed USD 100 billion investment that is explicitly linked to job creation; (b) strategic diversification of India’s export market base and reducing geopolitical risk; and (c) a new and smart template for India’s trade negotiations, ensuring concessions are balanced by tangible economic returns.
While the aforementioned advantages are definitely attractive, there are also certain disadvantages or concerns such as: (a) the risk of further trade deficit which is substantial even at present owing to overwhelming gold imports from Switzerland; (b) concerns about IPR (particularly its potential implications for India’s position as the ‘pharmacy of the world’ as a result of the provisions of the Indian Patents Act which protects generic drug production thereby aiding public health access; and (c) challenges to domestic market which is highly likely to face intense competition from highly specialized and competitively priced EFTA products.
Strategic Positioning in a Volatile World
The entry into force of the TEPA could not have been more timely, given the current state of global affairs.
Why TEPA is Crucial Now?
In an era defined by trade protectionism, geopolitical fragmentation, and the push for resilient global supply chains, the TEPA serves as a powerful instrument of foreign and economic policy. It anchors India firmly in the high-standard economic landscape of Europe, distinct from its ongoing, complex negotiations with the EU.
Moreover, the emphasis on investment, technology, and sustainable trade reflects a modern approach to international economic integration, prioritizing quality of capital and technological advancement over mere volumes of trade.
A Counter to US Tariffs?
A definitive response to the question of whether the EFTA pact is a direct counter to the enhanced tariffs or withdrawal of trade benefits by the US is complex. While not its sole motivation, the answer is partially yes.
India’s recent aggressive pursuit of FTAs with major economies like the India-Australia Economic Cooperation and Trade Agreement (“ECTA”), the Comprehensive Economic Partnership Agreement (“CEPA”), agreements with UAE, UK, and now the EFTA is a clear strategy to de-risk its export sector. When large traditional markets start using trade policies and tariffs as geopolitical weapons, such events give rise to uncertainty and create volatility.
The stage of development and evolving markets which India has now reached, it requires crucial buffers as well as strategic alternatives. Securing duty-free or preferential access to the wealthy and stable EFTA market does so for Indian exporters. It is part of a broader, proactive strategy of global market diversification rather than a simple reaction, yet the pact’s value as a strategic counter-balance is undeniable.
International Trade Law and India’s Decisive Policy Shift
The TEPA’s unique structure directly reflects a decisive shift in India’s foreign and trade policy. For years, India adopted a defensive posture, stepping away from large multilateral agreements (for eg. the Regional Comprehensive Economic Partnership in 2019) and even terminating many older Bilateral Investment Treaties (“BITs”) to shield itself from Investor-State Dispute Settlement (“ISDS”) claims. However, in the recent past, the focus has shifted to proactive economic diplomacy and signing high-quality FTAs with developed nations, demanding equitable terms.
The TEPA’s binding USD 100 billion investment commitment and the provision for suspension of concessions if the investment goals aren’t met is a novel strategy in international trade law, designed to make market access transactional and ensure a verifiable developmental return for Indian concessions. This pivot demonstrates India’s confidence in leveraging its large, fast-growing domestic market to attract capital, technology, and jobs, repositioning itself as a global rule-maker rather than a mere recipient of trade rules.
A Concluding Critique: Setting a New Bar
The India-EFTA TEPA is a significant accomplishment in India’s trade trajectory. While India has a history of signing bilateral and regional trade agreements, including major pacts with the UAE, Australia, and various cooperation agreements with individual European nations, the TEPA is unique because of its binding investment and employment assurance. This feature transforms a standard FTA into a partnership for development.
The success of the TEPA will ultimately hinge on two factors: the actual delivery of the USD 100 billion investment and India’s ability to monitor and utilize the innovative investment-for-access clause. If the EFTA States deliver on their investment pledge, and India successfully leverages the accompanying technology and expertise, the TEPA will set a powerful precedent, not only solidifying ties with the EFTA bloc but also serving as a robust template for all future trade negotiations with developed economies. It marks India’s evolution from seeking market access to demanding an active role in building domestic industrial capacity through strategic international capital.
(Views expressed are personal.)
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