The EFTA agreement, which came into effect between India and European countries on October 1st, is expected to generate $100 billion in investment and over 1 million jobs over the next 15 years. This partnership will boost India's manufacturing and exports, and the Indian economy is anticipated to cross $20 trillion by 2040.
India's growth: The trade agreement between India and the European Free Trade Association (EFTA) came into force on October 1st. It includes a binding commitment for $100 billion in investment and the creation of over 1 million jobs in the next 15 years. According to Jyoti Vij, DG of FICCI, this investment will prove to be a decisive step towards India's economy growing from $4 trillion to $20 trillion. EFTA will not only strengthen ‘Make in India’ but also solidify India's economic ties with Europe.
New Avenues for Investment Opened by EFTA Agreement
EFTA comprises Switzerland, Norway, Iceland, and Liechtenstein. India's agreement with these countries differs from traditional Free Trade Agreements. This agreement includes not just tariff concessions but also binding conditions for investment and employment. It stipulates that EFTA countries will invest $100 billion in India over the next 15 years, directly creating 1 million new jobs. This agreement will play a crucial role in strengthening ‘Make in India’ and local manufacturing.
A Major Turning Point for India's Economy
FICCI Director General Jyoti Vij stated that this agreement could prove to be a milestone in India's economic journey. According to her, India is currently an economy of about $4 trillion, but if the pace of investment continues at this rate, India could become a $20 trillion economy in the next 15 years. For this, the investment rate must be increased from the current 30 percent to 33-34 percent.
She informed that over the past ten years, the average share of FDI in India has been approximately 8.3 percent. Meanwhile, the total FDI figure over the last 11 years has reached nearly $750 billion. However, to achieve the target of a $20 trillion economy, India will need to attract an additional investment of $2 trillion by 2035 and $2.4 trillion by 2040.
$100 Billion Deal Could Be Completed Sooner
At the recently held India-EFTA Prosperity Summit in New Delhi, both sides showed enthusiasm for investment. The business community believes that the target of $100 billion in investment could be achieved ahead of schedule. If India succeeds in attracting $75 billion to $100 billion in investment from EFTA over the next 10 years, these countries' share in India's total FDI could increase from the current 1.6 percent to 4-5 percent.
India-EFTA Trade Currently at a Modest Level
Currently, trade figures between India and EFTA countries are not very substantial. In fiscal year 2024-25, the total trade between both sides was approximately $24.4 billion. India's exports were only $2 billion, while gold imports stood around $22 billion. This disparity is expected to gradually decrease after the TEPA agreement, as EFTA has now granted tariff concessions on 99.6 percent of exports from India.
India can also reap significant benefits in the agricultural sector. Tariffs have been eliminated on items such as grapes, rice, vegetables, nuts, seeds, marine products, coffee, and processed food. This will provide Indian farmers and exporters with an opportunity to enhance their presence in the European market.
New Opportunities for the Manufacturing Sector
Under the TEPA agreement, India's manufacturing sector is also set to gain significantly. Exporters of electrical machinery, aluminum, and copper products, in particular, will gain new access to the European market. India has opened 82.7 percent of its tariff lines for EFTA countries, providing them with better access to the Indian market as well. However, sensitive sectors like agriculture continue to be protected.
No changes have been made to the duties on gold. This decision was taken keeping India's financial stability in mind, ensuring no additional pressure on the country's gold import business.
Ties with Europe to Strengthen Further
Beyond EFTA, negotiations for a Free Trade Agreement (FTA) between India and the European Union are also progressing rapidly. Additionally, with the signing of the CETA (Comprehensive Economic and Trade Agreement) between Canada and the European Union, India-Europe economic relations will further solidify. This will provide India with not only commercial but also technological and industrial cooperation in Europe.
