India-EFTA Trade and Economic Partnership Agreement   UPSC GS-2 IR/PSIR

India-EFTA Trade and Economic Partnership Agreement UPSC GS-2 IR/PSIR

The India-EFTA TEPA is a comprehensive trade pact between India and four non-EU European countries — Iceland, Liechtenstein, Norway and Switzerland — aimed at boosting trade, investment, jobs, services, technology and supply-chain resilience.

Why in News?

The India-European Free Trade Association Trade and Economic Partnership Agreement was signed on 10 March 2024 and came into effect on 1 October 2025. It is seen as an important step in India’s trade strategy with advanced European economies.

Core purpose of TEPA

The agreement aims to reduce tariff and non-tariff barriers, improve market access, attract investment and create jobs.

• EFTA has committed USD 100 billion investment in India over 15 years
• Target: 1 million direct jobs
• Investment split: USD 50 billion in first 10 years and another USD 50 billion in next 5 years
• Focus on fair, transparent and predictable access for investors and service providers

Market access and tariff concessions

TEPA gives India wider access to EFTA markets.

• EFTA offers 92.2% tariff lines, covering 99.6% of India’s exports
• EFTA gives access mainly for non-agricultural and processed agricultural goods
• India offers 82.7% tariff lines, covering 95.3% of EFTA exports
• Indian basmati and non-basmati rice get duty-free access without reciprocity
• Sensitive Indian sectors like dairy, soya, coal and PLI-linked sectors are excluded

Services and mobility

The agreement supports India’s services strength and professional mobility.

• Better access in IT, education, culture, sports and professional services
• Includes Mutual Recognition Agreements in regulated professions such as nursing, accountancy and architecture
• Supports service delivery through digital trade, commercial presence and temporary movement of professionals

Technology and investment cooperation

TEPA is important because it links trade with investment and technology transfer.

• Cooperation in precision engineering, health, renewable energy, R&D and innovation
• Scope for technology transfer in agriculture, pharmaceuticals, garments, medical instruments and clean technologies
• Supports Make in India and Atmanirbhar Bharat
• The India-EFTA Desk under Invest India acts as a single-window facilitation mechanism for EFTA businesses investing in India

Intellectual property and safeguards

The agreement includes IPR provisions while protecting India’s public health interests.

• IPR commitments remain at TRIPS level
• India’s interests in generic medicines and concerns over patent evergreening are addressed
• India can withdraw tariff concessions if investment targets are not met
• TEPA includes dispute resolution and trade facilitation mechanisms

Significance for India

TEPA is significant because it connects India with advanced European economies and may act as a template for future trade deals.

• First major trade pact with a western developed-country grouping
• Can support supply-chain diversification
• Can attract stable investment from advanced economies
• Can boost Indian exports in machinery, organic chemicals, textiles and processed foods
• Can strengthen India’s position in negotiations with the EU and other developed partners
• May help reduce overdependence on China-linked supply chains

Current trade concern

India has a large trade deficit with EFTA.

• India-EFTA bilateral trade was around USD 25 billion in 2023
• India’s exports were about USD 2.8 billion
• Imports were about USD 22 billion
• The deficit is mainly due to imports from Switzerland, especially gold
• Switzerland accounts for a major share of India-EFTA trade

Challenges
The agreement has strong potential, but several issues remain.

• Trade deficit: India’s deficit with EFTA remains high due to gold imports.
• Limited gold impact: No major tariff benefit is offered on gold, which is the largest trade component.
• Agriculture barriers: Indian farm exports may still face quality standards, approval requirements and tariff barriers.
• Sensitive sectors excluded: Dairy, soya, coal and some agricultural items are excluded.
• IPR concerns: India must protect affordable generic medicines and prevent pressure on patent safeguards.
• EU linkage issue: Since EFTA countries are closely linked with the EU market, India-EFTA trade may create distortions if the India-EU FTA is delayed.

Way Forward

India must ensure that TEPA delivers real investment, export growth and technology benefits.

• Diversify exports beyond low-value goods and reduce dependence on gold-linked trade
• Use the India-EFTA Desk for faster investment facilitation
• Push value-added exports in pharma, chemicals, engineering goods, textiles, processed foods and services
• Protect India’s generic drug industry while maintaining balanced IPR commitments
• Use EFTA strengths in clean technology, innovation, skills and sustainability
• Conclude the India-EU FTA early to reduce trade distortions and improve regulatory alignment
• Strengthen dispute resolution and monitoring of the USD 100 billion investment target
  

The India-EFTA TEPA is more than a tariff-cutting agreement. It is an investment-linked trade pact that can support India’s exports, jobs, technology access and supply-chain diversification, but its success will depend on actual investment inflows, careful IPR management and reduction of India’s trade deficit with EFTA.