India-EFTA Free Trade Agreement | 01 Oct 2025

Source: PIB

Why in News?

India’s Free Trade Agreement (FTA) with the EFTA bloc - comprising Switzerland, Norway, Iceland, and Liechtenstein, has come into effect, marking a significant step in strengthening trade and investment ties. The agreement reflects India’s growing role in global value chains and its strategy to expand market access while attracting foreign investment. 

What is India-EFTA FTA? 

• About: The India-EFTA FTA (Trade and Economic Partnership Agreement (TEPA) was finalized in March 2024, and came into effect on 1st October 2025. 
  • It strengthens India’s global trade ties, complementing recent FTAs with UAE, Australia, and the UK.
• Objectives:
  • Enhanced Market Access: EFTA has given 100% market access for India’s industrial and non-agricultural products. Tariff concessions provided on processed agricultural products.
  • Investment & Jobs: EFTA nations will bring in a binding investment commitment of USD 100 billion over 15 years. This investment is expected to generate 1 million direct jobs in India.
  • Dedicated Institutional Mechanism for Trade Facilitation: A dedicated EFTA Desk, operational since February 2025, acts as a single-window investment facilitation mechanism. Supports EFTA businesses in investing, expanding, and operating in India.

What are Free Trade Agreements?

• About: FTAs, or Free Trade Agreements, are pacts between two or more countries to reduce or eliminate barriers to trade, such as tariffs (taxes on imports/exports) and quotas, on goods and services. 
  • India has Free Trade Agreements (FTAs) with countries and groups like Japan, Australia, the UAE, Mauritius, the European Free Trade Association (EFTA), Singapore and Sri Lanka. 
    
    • Also, India–EU FTA is currently in advanced negotiations.
• India’s Gains from Free Trade Agreements
  • Market Access: Expand exports by reducing tariffs/non-tariff barriers (e.g., India-UAE CEPA gave duty-free access to 90% of exports; exports grew 12% in the first year of CEPA implementation).
  • Investment Boost: Attract stable FDI (India-Australia ECTA led to 25% surge in FDI inflows).
  • Agriculture Gains: New export markets for farmers (India-Mauritius CECPA increased agri exports like sugar & tea).
  • Technology Transfer: Access advanced tech (India-Australia ECTA in renewables aiding energy transition).
  • SME Support: Wider global value chain integration (India-Singapore CECA benefits SMEs in IT & engineering).
  • Regulatory Alignment: Harmonization of standards (India-EFTA TEPA aligns product certifications, cuts compliance costs).
• Concerns with India’s FTAs: 
  • Trade Deficits: Rising imports vs stagnant exports (India-ASEAN FTA has led to a significant rise in imports to $44 billion in FY23)
  • Limited Developed Market Access: Non-tariff barriers restrict entry (e.g., Delay in trade agreement with EU due to IPR/data issues).
  • Small Farmers & MSMEs at Risk: Competition from cheap imports hits vulnerable sectors (e.g., rubber farmers under ASEAN FTA).
  • Labor & Environmental Clauses: Binding conditions like EU's Carbon Border Adjustment Mechanism may hurt Indian exports.
  • Weak Dispute Resolution: Slow/unbalanced mechanisms (e.g., India-ASEAN disputes on palm oil, machinery tariffs).

What Measures can India Adopt to Strengthen its Position in Global Trade?

• Strengthen Export Competitiveness: Focus on quality, branding, and technology upgrades in manufacturing and agriculture.
• Diversify Trade Partners: Expand FTAs to cover emerging markets in Africa, Latin America, and Asia-Pacific.
• Support MSMEs and Startups: Simplify access to credit, logistics, and e-commerce platforms for export-oriented small enterprises.
• Improve Infrastructure: Expand ports, logistics hubs, freight corridors, and cold chain facilities to reduce transaction costs.
• Enhance Compliance and Standards: Facilitate capacity building for exporters to meet international quality, labor, and environmental norms.
• Leverage Digital Trade Platforms: Promote virtual trade shows, e-marketplaces, and online FTA utilization for wider reach.

Conclusion

The India–EFTA FTA marks a significant step in strengthening India’s global trade ties, boosting exports, attracting investments, and promoting economic integration, while also requiring careful management of domestic industry challenges and strategic trade diversification.