The $100 Billion Handshake: India’s Landmark EFTA Trade Pact Kicks Off, Promising Investment and Market Access

Introduction

October 1, 2025, marks a watershed moment in India’s trade diplomacy as the Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA) bloc officially comes into force. This agreement, encompassing the economic powerhouses of Switzerland, Norway, Iceland, and Liechtenstein, is far more than a simple tariff reduction pact. It is a strategically designed deal that, for the first time in an Indian trade agreement, directly links market access to a binding investment commitment.

The EFTA bloc has pledged an unprecedented $100 billion in Foreign Direct Investment (FDI) into India over the next 15 years, a move expected to generate one million direct jobs. With the agreement now operational, Indian exporters of textiles, chemicals, and processed foods gain duty-free access to some of the world's most affluent markets, while Indian consumers can look forward to lower prices on high-quality Swiss goods like watches and chocolates. This pact positions India at the forefront of global trade, demonstrating its ambition to become an essential link in high-value European supply chains.

The Core of TEPA: Investment and Job Creation

The single most striking feature of the India-EFTA TEPA is its investment clause, making it a unique deal in New Delhi's history of Free Trade Agreements (FTAs).

The four EFTA states have made a binding commitment to channel a total of $100 billion in FDI into India over 15 years:

• $50 billion within the first 10 years.

• An additional $50 billion in the subsequent five years.

Crucially, this commitment is specifically for Foreign Direct Investment, excluding volatile Foreign Portfolio Investment (FPI), and is directly linked to an estimated creation of one million direct jobs in India. This investment commitment focuses on building productive capacity in India, with key sectors expected to benefit including:

• Pharmaceuticals and Chemicals: Leveraging Swiss and Norwegian expertise.

• Precision Engineering and Machinery: Essential for 'Make in India' goals.

• Renewable Energy and Health Sciences: Aligning with sustainable development goals.

To safeguard India's interests, the pact includes a provision allowing India to re-balance or suspend duty concessions if the investment commitments are not met—a powerful incentive for EFTA partners to fulfill their promise.

Goods: Improved Market Access and Tariff Cuts

The agreement offers significant concessions on trade in goods, although the nature of the benefits differs for each partner:

• For India: Indian exporters gain immediate or phased duty-free access on 99.6% of the EFTA bloc’s exports. This covers 92.2% of the bloc's tariff lines, including 100% of non-agricultural products. Key Indian sectors set to gain include:

  • Textiles and Apparel

  • Organic Chemicals and Pharmaceuticals (excluding certain protected PLI sectors)

  • Processed Foods (including basmati rice, guar gum)

  • Marine Products (e.g., duty elimination on frozen shrimps in Iceland).

  • Gems and Jewellery

• For EFTA: India will phase out tariffs on 80-85% of imported goods from EFTA countries over a period of 5, 7, or 10 years. This means lower prices for domestic consumers on items like:

  • Watches and Clocks (Swiss)

  • Chocolates, Biscuits, and Wines

  • Machinery and Medical Equipment

  • Certain Dyes and Chemicals

Protection of Sensitive Sectors: India has strategically protected its most sensitive domestic sectors by placing them on an exclusion list. There will be no duty concessions on:

• Dairy and Soya

• Sensitive Agricultural Products

• Coal

Furthermore, gold, which constitutes over 80% of EFTA's exports to India (largely from Switzerland), sees no change in its effective duty, safeguarding India's existing trade balance on this item.

Services Sector: A Boost for Indian Professionals

The services sector, which is a major pillar of the Indian economy, stands to gain significantly. TEPA features enhanced commitments for the movement of professionals, technology transfer, and market access.

• For India’s Services Exporters: India has secured improved market access in sub-sectors across all four EFTA nations. This is particularly beneficial for:

  • IT and Business Services (Mode 1 & 3)

  • Professional Services (potential for Mutual Recognition Agreements in nursing, architecture, etc.)

  • Audio-Visual and Education Services

• For EFTA’s Service Providers: The agreement facilitates easier market entry in India, especially in the financial sector. For instance, the foreign capital limitation in the Indian banking sector will be uplifted from 51% to 74% for EFTA financial service providers. The pact also streamlines the entry and temporary stay of key personnel, such as for the installation and maintenance of complex machinery.

Strategic Impact and Future Outlook

The TEPA is a critical milestone, being India’s first trade pact with a major European bloc and its first with a developed Western hemisphere country. The agreement:

• Diversifies India’s Trade Basket: It opens access to high-income, technology-driven economies, providing an avenue for Indian MSMEs to integrate into higher-value European supply chains.

• Technology and R&D Access: The pact facilitates collaboration in cutting-edge areas like precision engineering, green maritime technology (Norway), and health sciences.

• Gateway to the EU: Indian companies can leverage Switzerland, which exports over 40% of its global services to the EU, as a base for extending their reach into the larger European Union market.

A dedicated India-EFTA Desk has been established to act as a single-window mechanism, ensuring EFTA businesses can smoothly invest and establish operations in India, reinforcing the long-term success of the agreement.

FAQs

Q1: Which countries are part of the EFTA bloc? A: The EFTA bloc consists of four European countries: Switzerland, Norway, Iceland, and Liechtenstein.

Q2: What is the binding investment commitment made by EFTA? A: The EFTA states have committed to facilitating $100 billion in Foreign Direct Investment (FDI) into India over the next 15 years, with the goal of creating one million direct jobs.

Q3: What are the biggest gains for Indian exporters under TEPA? A: The biggest gain is the duty-free access on 99.6% of India's exports to the EFTA market, including machinery, textiles, organic chemicals, and processed foods.

Q4: Which Indian sectors are protected from tariff cuts? A: Sensitive sectors like dairy, soya, coal, and certain agricultural products have been kept on the exclusion list to safeguard domestic producers. The effective duty on gold imports also remains unchanged.

Q5: What impact will TEPA have on Indian consumers? A: Indian consumers will eventually see lower prices on high-quality imported goods from EFTA countries, such as Swiss watches, chocolates, and certain machinery, as India phases out customs duties over 5 to 10 years.

Conclusion

The official launch of the India-EFTA TEPA is a powerful declaration of India’s economic maturity and strategic foresight. By securing a binding, substantial investment commitment alongside favorable market access for goods and services, New Delhi has crafted a sophisticated trade agreement that transcends simple tariff cuts. This $100 billion handshake with the world's most innovative economies will inject critical capital, create high-quality jobs, and facilitate the transfer of advanced technology, thereby cementing India’s role as a major, high-value global trade partner. The operationalization of TEPA today is not just an end to years of negotiation; it is the beginning of an ambitious new trajectory for India’s future economic growth.