INDIA-EFTA TRADE AND ECONOMIC PARTNERSHIP AGREEMENT (TEPA)

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Context: 

The Union Minister of Commerce and Industry announced that the Free Trade Agreement between India and the European Free Trade Association (EFTA), will be implemented from 1st October, 2025.

INDIA-EFTA TRADE AND ECONOMIC PARTNERSHIP AGREEMENT (TEPA)

What is the India-EFTA TEPA?

The India-EFTA Trade and Economic Partnership Agreement (TEPA) is signed between India and the European Free Trade Association (EFTA) in March 2024, to remove or reduce tariffs on goods, set up rules for services and protect intellectual property rights. 

• The EFTA is a group of four European countries known for being highly developed and innovative, but they are not part of the European Union (EU). 
• The EFTA member: Iceland, Liechtenstein, Norway and Switzerland.

What are the main provisions of this agreement?

Investment Commitment => The EFTA nations have pledged to invest $100 billion in India over the next 15 years, to create 1 million jobs. 

Tariff Reduction & Market Access

• EFTA is offering 92.2% of its tariff lines which covers 99.6% of India’s exports. The EFTA’s market access offer covers 100% of non-agri products and tariff concession on Processed Agricultural Products (PAP).
• India is offering 82.7% of its tariff lines which covers 95.3% of EFTA exports of which more than 80% import is Gold. Also reduce or remove import duties on a wide range of industrial goods from EFTA, such as certain pharmaceutical products, machinery, and luxury items like watches.

Technology Transfer & Cooperation => EFTA countries, being technologically advanced, have agreed to share their expertise with India. This includes areas like precision engineering, advanced pharmaceuticals, financial services, and renewable energy.  

Sustainable Development & Human Rights => TEPA includes clauses that promote green technology, clean energy, responsible business practices, and human rights.  

Services and Other Provisions => Specific provisions for Mutual Recognition Agreements (MRAs); professional qualifications from one country be recognized in another, easier for professionals to work across borders.

How will India benefit from TEPA?

Boost to Indian Exports => Easier and cheaper exports in key sectors like pharmaceuticals, textiles, jewelry, and IT services.

Align to "Make in India" & "Atmanirbhar Bharat" => Encouraging EFTA companies to set up manufacturing units in India, especially in sectors like infrastructure, chemicals, pharmaceuticals, machinery, and food processing.  

Job Creation => The pledged $100 billion investment from EFTA nations and the overall increase in economic activity are expected to create around 1 million direct and indirect jobs for Indians.

Diversification of Supply Chains => Helps both India and EFTA countries to get their raw materials and finished goods from more diverse sources, making their supply chains stronger and less vulnerable to disruptions (like during a pandemic).

Access to Advanced Technology =>  India will gain access to modern technologies and expertise from EFTA nations, which are leaders in many high-tech fields. This supports India's economic growth by promoting innovation and industrial development.

What are the potential concerns with this agreement?

Data Exclusivity Provisions => New drug manufacturers (from EFTA countries) get a period (e.g., 5-6 years) where their clinical trial data cannot be used by generic drug makers to produce cheaper versions of that drug.

• Indian generic companies have to conduct their own, expensive, and time-consuming trials, or wait for the period to end, before they can make cheaper versions of new medicines. 
• This could impact access to affordable medicines for Indian citizens and affect India's strong domestic pharmaceutical industry.

Exclusion of Sensitive Sectors => India has excluded some "sensitive" sectors from tariff reductions. This includes products like dairy, coal, and certain agricultural goods.  

Asymmetric Trade Benefits => Benefits might not be perfectly balanced. Critics point out that India is opening its markets more than EFTA is for some products.

Existing Trade Deficit => In 2023, India imported goods worth $20.45 billion from EFTA countries but only exported $1.87 billion to them.  

How does TEPA compare to other trade deals India has made?

TEPA is considered more "advanced" due to its focus on non-traditional trade issues like sustainability and the unique investment commitment, reflecting a new generation of FTAs.

Conclusion

India-EFTA Trade and Economic Partnership Agreement (TEPA), with its focus on investment and technology, is a strategic move to help India achieve its goals of becoming a global manufacturing powerhouse and a more self-reliant economy.

Must Read Articles: 

EUROPEAN FREE TRADE ASSOCIATION 

INDIA-EFTA TRADE DEAL IS MUTUALLY BENEFICIAL 

Source: NEWSONAIR