India-EFTA trade deal to be signed on Sunday

The India-EFTA (European Free Trade Association) free trade agreement is scheduled to be signed on Sunday. This will mark the first formally signed FTA among India's ongoing trade talks. Negotiations with Oman and the UK are also in the final stages. The India-EFTA deal will be signed at Bharat Mandapam. 

Mint first reported that the FTA with the four-nation EFTA comprising Iceland, Liechtenstein, Norway and Switzerland was to be taken up by the Cabinet for approval and the deal was to be inked on Sunday. The draft agreement was cleared by the Cabinet on Thursday. 

Mint also reported that the four-nation bloc has offered duty-free market access for India's animal products, fish, processed food, and vegetable oils in the trade pact.  

The EFTA nations have also proposed a $100 billion investment in India by their companies over 15 years, which is estimated to create about a million jobs. The two sides began negotiations for a trade treaty in 2008.

Queries emailed to the commerce secretary and its spokesperson on Saturday afternoon were not immediately answered.

However, trade experts don't see any major gain from the deal, considering that 98% of India's exports to Switzerland are industrial goods entering at zero tariffs. 

“India's agricultural exports are minimal and unlikely to increase significantly due to strict quality standards and non-tariff barriers,” said Ajay Srivastava, who heads trade think tank, Global Trade Research Initiative (GTRI). 

The GTRI has also raised concerns about private firms deciding investments based on their criteria. "What mechanism would be used to get EFTA to create one million jobs or attract $100 billion in investments is to be seen. Generally, FTA texts do not have such provisions," he said.

“Gold will be a tricky issue for India as the precious yellow metal, accounting for 80% of India's imports from Switzerland, is a critical factor. If the FTA does not include gold, it may not meet the WTO Article XXIV condition for FTAs to have duty cuts on substantial trade. Making concessions on bound duty but above the current applied duty will not result in any effective concession," Srivastava added.

India has a large trade deficit with EFTA, especially with Switzerland. In FY2023, India's imports from EFTA were significantly higher than its exports, leading to a trade deficit of $14.8 billion. 

“Switzerland's decision to eliminate import duties on all industrial goods for all countries, effective from 1 January 2024, diminishes the benefits India could gain from the FTA. This directly affects 98% of India’s merchandise exports to Switzerland,” he said.

“India faces difficulties in exporting agricultural produce to Switzerland due to a complex web of tariffs, quality standards, and approval requirements, but EFTA has not shown any inclination to make agriculture tariffs zero on most basic agricultural produce,” Srivastava said.

“The potential gains for India in the services sector are limited, with the FTA likely to maintain existing levels of policy commitments, offering little advantage to India,” he said.

India’s exports to the EFTA countries in FY24 (April 2023-January 2024) were at $1.87 billion, including items like chemicals, pharmaceuticals, apparel, and pearls, precious and semi-precious stones. 

India imported goods worth $20.45 billion from the EFTA countries in 2023, including pearls, precious or semiprecious stones, precious metals and coins valued at $16.7 billion.