India announced the signing of a free trade agreement (FTA) with four European countries that New Delhi described as ‘binding’, including a commitment by the partner countries to invest $100 billion and create 1 million jobs over 15 years.
The agreement was signed after more than 15 years of negotiations with the European Free Trade Association (EFTA), which includes Switzerland, Iceland, Norway and Liechtenstein, which are not major trading partners for New Delhi.
The announcement came days before Prime Minister Narendra Modi announced the dates for national elections.
Since coming to power in 2014, Modi’s government has been actively pursuing trade deals, signing agreements with the United Arab Emirates, Australia and Mauritius. But trade deals with New Delhi’s much larger European trading partners, the EU and the UK, have yet to materialise.
EFTA spokeswoman Asdis Olafsdottir said the association countries would aim to increase foreign direct investment in India by $50 billion in the first ten years of the agreement and another $50 billion in the next five years, which they hope will create 1 million jobs in the country of 1.4 billion people.
“India’s tariff reductions are not dependent on EFTA investment in India under the agreement,” Olafsdottir told the Financial Times. India has the possibility to suspend the concessions 20 years after the entry into force of the agreement if the common objectives are not met,” Olafsdottir said.
The deal is expected to give European companies easier access to India’s huge market in areas such as processed food and beverages, electrical machinery and luxury goods such as Swiss watches.
According to the Indian government, the agreement covers more than 82 per cent of its own tariff lines, each representing a separate product accounting for more than 95 per cent of EFTA exports.
However, sectors such as dairy, soya, coal and ‘sensitive agricultural products’ are excluded. By far the largest EFTA export to India is gold, and New Delhi has said that the effective duty on this product will remain untouched.
India said the deal would boost services exports in areas such as information technology, business services and education, and give a boost to Modi’s ‘Make in India’ initiative to boost investment and job creation in the country’s underperforming manufacturing sector.
New Delhi said the agreement would improve EFTA’s access to more than 92 per cent of tariff lines covering almost all of its exports to the bloc.
“For the first time, India is signing FTAs with four developed countries, an important economic bloc in Europe,” Indian commerce minister Piyush Goyal said in a statement. For the first time in the history of FTAs, commitments of $100 billion in investment and 1 million direct jobs over the next 15 years have been made,” he said.
According to the Indian Ministry of External Affairs, Norway’s FDI in India in the first two decades of this century was only $280 million, while the Swiss government says that Switzerland’s FDI in India between 2000 and 2022 will be $10.5 billion.
A Swiss official said the two sides were acting on the principle of achieving a ‘balanced’ agreement between the world’s most populous country and four rich but small countries.
“If you look at the different market sizes, India offers 1.4 billion inhabitants, it’s also a gateway to the global world, and we together are 15 million,” Helene Budliger Artieda, Switzerland’s state secretary for economic affairs, told reporters: “The commitment to this foreign investment makes this a balanced agreement.”
The announcement comes amid continuing delays in India’s negotiations on a much larger potential free trade deal with the UK, with negotiators at loggerheads over Indian social security, visas for Indian workers and other issues. The latest round of talks on the deal ended last week.
