India’s Historic Trade Pact with European Collaboration comes into effect on October 1

India has launched its first trade agreement with the European Free Trade Association (EFTA) bloc, comprising Switzerland, Liechtenstein, Norway, and Iceland. Operational from October 1, the Trade and Economic Partnership Agreement (TEPA) ties market access to $100 billion in investments over 15 years, creating potential for one million jobs. With 80–85% tariff cuts, it prioritizes industrial growth and positions India for deeper economic ties with Europe, despite existing trade deficits.

India has taken a significant leap in its global trade strategy by formalizing its first-ever trade agreement with the European Free Trade Association (EFTA) bloc. This landmark agreement, operational from October 1, marks a major milestone in India’s trade diplomacy, as it establishes a formal economic relationship with the four-nation group comprising Switzerland, Liechtenstein, Norway, and Iceland.

To commemorate the event, a high-profile launch ceremony is being hosted at Bharat Mandapam in New Delhi. The event will see the participation of Commerce and Industry Minister Piyush Goyal, alongside senior officials and ministers from the EFTA nations, as well as representatives from the business and industry sectors. Speaking at the UP International Trade Show, Minister Goyal remarked, “From the first of next month, a group of four countries—Switzerland, Liechtenstein, Norway, and Iceland—will also come into effect.” This underscores the significance of the agreement as a strategic step for India in Europe.

A Long-Awaited Partnership

The Trade and Economic Partnership Agreement (TEPA) between India and the EFTA bloc was initially signed on March 10, 2024. However, its implementation had been delayed due to procedural formalities in the member nations. Now, with all approvals in place, the agreement is set to become a reality.

Government officials have emphasized that the launch is not merely ceremonial but also serves as a critical outreach initiative. “The idea is to ensure that industry stakeholders are aware of the deal and positioned to fully utilize its benefits,” a senior official explained. This reflects the government’s intent to maximize the agreement’s impact on domestic industries and exporters.

Key Features of the EFTA Trade Pact

The TEPA stands out as a unique agreement in India’s trade history for several reasons. It is not only the first trade pact with a European bloc but also the first to directly link market access to investment commitments. Under the agreement, India will eliminate tariffs on 80–85 percent of goods imported from EFTA countries. In return, Indian exporters will gain duty-free access to 99 percent of goods entering EFTA markets.

Sensitive sectors such as agriculture and dairy have been excluded from tariff reductions to protect domestic farmers, a move that underscores the government’s commitment to safeguarding vulnerable industries.

One of the most striking aspects of the deal is the investment commitment from EFTA countries. Over the first 10 years of the agreement, the bloc has pledged to invest $50 billion in India. This will be followed by an additional $50 billion over the subsequent five years. The Indian government estimates that this infusion of capital could generate one million direct jobs over the next 15 years, offering a boost to the nation’s industrial and employment growth.

Trade Dynamics and Economic Implications

Unlike many of India’s other trading partners, the EFTA nations already maintain relatively low import tariffs, which may limit immediate market-access gains for India. However, the agreement’s focus on investment ensures that benefits are mutual and long-term.

Switzerland is the dominant player among the EFTA nations in terms of trade with India. In the fiscal year 2024–25, India exported goods worth $1.97 billion to the bloc, with nearly 75 percent of these exports going to Switzerland. On the other hand, imports from EFTA totaled $22.44 billion, with Switzerland alone accounting for $21.8 billion, or 97 percent, of the total imports. This trade imbalance has resulted in a significant deficit of $20.47 billion.

While the trade gap is substantial, the agreement’s investment-oriented design is seen as a way to offset this disparity, with the potential to drive long-term industrial growth and job creation in India.

A Strategic Shift in Trade Diplomacy

The EFTA trade agreement signals a strategic pivot in India’s approach to international partnerships. By prioritizing investment over mere tariff reductions, India is focusing on fostering industrial growth and creating employment opportunities at home. This agreement also represents a breakthrough in India’s engagement with Europe, a market where previous attempts at trade pacts have faced challenges.

As the TEPA comes into force, it is expected to not only deepen India’s economic ties with the EFTA bloc but also set a precedent for future agreements with other European partners. With billions in investments, enhanced market access, and a focus on sustainable growth, the pact holds the promise of ushering in a new era of collaboration between India and Europe.