India-EFTA Free Trade Agreement to Come into Effect from 1st October

Why in news ?

• The Free Trade Agreement (FTA) between India and the European Free Trade Association (EFTA) will come into effect from 1st October 2025.
• This agreement is not only economically significant but also legally incorporates environmental, labor, and human rights provisions.

EFTA: Members and Background

EFTA Members:-

• Iceland
• Liechtenstein
• Norway
• Switzerland

Key Points:-

• EFTA was established in 1960 under the Stockholm Convention.
• Its primary objective is to promote free trade and economic integration among member countries.
• India and EFTA signed this agreement as a Trade and Economic Partnership Agreement (TEPA) on 10th March 2024.

Investment and Employment Commitments:-

• Total Investment Commitment: $100 billion over 15 years
  • First 10 years: $50 billion
  • Next 5 years: $50 billion
• Employment Generation: Estimated 1 million direct jobs in India

Focus Areas for Investment:-

• Pharmaceuticals
• Machinery
• Optical equipment
• Watches
• Chocolate
• Processed agricultural products

Market Access and Tariff Benefits:-

• India will provide 94.7% better market access to Switzerland (2018-2023 data, excluding gold).
• Tariffs on Swiss watches, chocolate, and cut & polished diamonds will be reduced or eliminated.
• The agreement will help make India’s high-value products competitive in global markets.

Sustainability Clause: Environment and Human Rights:-

• The agreement includes a unique sustainability framework.
• Environmental protection, labor rights, and social welfare cannot be compromised under this FTA.
• Both parties reaffirm their commitment to international agreements.
• This enhances predictability and legal certainty in trade relations.

Significance for India:-

• This is the first trade agreement with such a large investment commitment.
• Helps attract long-term capital for high-end industries and employment generation.
• Facilitates India’s integration into global value chains in pharmaceuticals, machinery, and precision equipment sectors.
• Aligns India’s trade policy with Sustainable Development Goals (SDGs).

Other Important Points

• India signed the TEPA with EFTA.
• EFTA members include Switzerland, Iceland, Norway, and Liechtenstein.
• EFTA was established in 1960.
• The agreement is strategically important for India for high-value industries and employment generation.