The India-EFTA Trade Agreement: A New Blueprint for Economic Partnership 

The India-EFTA Trade and Economic Partnership Agreement (TEPA), now in effect, represents a groundbreaking shift in trade policy by linking market access with binding investment commitments. In exchange for tariff concessions on over 92% of goods, the four EFTA nations (Switzerland, Norway, Iceland, and Liechtenstein) have pledged to facilitate $100 billion in foreign direct investment into India over 15 years, aiming to create one million jobs—a first-of-its-kind, enforceable guarantee in an Indian FTA.

This pact strategically opens doors for EFTA’s high-value exports like machinery and pharmaceuticals while protecting sensitive Indian sectors, and it seeks to reduce India’s trade deficit by boosting its exports. Ultimately, TEPA is a strategic partnership designed to foster technology transfer, integrate India into global value chains, and set a new benchmark for balanced economic cooperation between developed and developing economies.

The India-EFTA Trade Agreement: A New Blueprint for Economic Partnership 

The entry into force of the Trade and Economic Partnership Agreement (TEPA) between India and the European Free Trade Association (EFTA) on October 1, 2025, is far more than a new trade deal. It represents a strategic reconfiguration of India’s economic diplomacy and a novel template for North-South cooperation. After 16 years and 21 grueling rounds of negotiations, this pact links market access with binding investment guarantees—a first for India. 

For businesses and policymakers, TEPA is a live experiment. Its success hinges not just on tariff reductions, but on the realization of an unprecedented $100 billion investment pledge and the management of complex geopolitical and economic cross-currents. 

A Pact Forged Over Decades 

The journey to TEPA’s signing in March 2024 was exceptionally long, reflecting the difficulty of aligning the interests of a large, fast-developing economy with those of a bloc of small, highly developed nations. The core challenge was balancing ambition with prudence. EFTA nations, particularly Switzerland, sought deeper access for their high-value goods and stronger intellectual property (IP) protections. India, protective of its domestic industries and public health safeguards, demanded tangible returns for any concessions made. 

The resulting agreement is a 14-chapter document covering everything from goods and services to intellectual property, sustainable development, and dispute settlement. Its central bargain is clear: enhanced market access in exchange for guaranteed, job-creating investment. EFTA has eliminated or reduced tariffs on 92.2% of its tariff lines, covering nearly all (99.6%) of India’s exports. India reciprocated with concessions on 82.7% of lines, covering 95.3% of EFTA’s exports, while strategically protecting sensitive sectors like dairy, soya, and agriculture. 

The $100 Billion Game-Changer: Investment with Strings Attached 

The most groundbreaking feature of TEPA is Article 7.1, which commits the four EFTA states to promote $100 billion in foreign direct investment (FDI) into India over 15 years, aiming to create one million direct jobs. This commitment is structured in two phases: $50 billion within the first decade, followed by another $50 billion in the subsequent five years. 

This transforms TEPA from a standard free trade agreement into a partnership for development. For India, it represents a direct channel for the long-term, capacity-building capital it needs to upgrade its manufacturing base and integrate into global value chains. Crucially, the agreement includes a mechanism allowing India to rebalance or suspend its own tariff concessions if the investment targets are not met—an unprecedented enforcement tool in India’s trade history. 

To operationalize this, India launched the dedicated India-EFTA Desk in February 2025. This single-window platform is designed to guide investors, foster joint ventures, and facilitate connections with key government agencies, prioritizing sectors like renewable energy, life sciences, and digital transformation. 

A Note of Caution for Investors 

However, businesses should note a critical distinction. Unlike traditional Bilateral Investment Treaties (BITs), TEPA’s investment chapter does not offer robust international legal protections for investors. It lacks common safeguards like protection against expropriation, guarantees of Fair and Equitable Treatment (FET), and, most importantly, access to Investor-State Dispute Settlement (ISDS). Swiss investors, for instance, no longer have the protections of the terminated 1997 India-Switzerland BIT. This means disputes will likely be resolved through domestic courts or diplomatic channels, increasing the importance of comprehensive contractual risk mitigation and political risk insurance. 

Sectoral Winners and the Rebalancing Act 

TEPA’s impact will be felt unevenly across industries, creating clear winners while testing the resilience of others. The phased tariff elimination—over 3, 5, 7, or 10 years—gives domestic industries time to adapt. 

Table: Key Sectoral Impacts of the India-EFTA TEPA 

The agreement also aims to tackle a persistent imbalance. India runs a significant trade deficit with EFTA, which stood at over $20 billion in FY 2024-25, driven overwhelmingly by gold imports from Switzerland. Tellingly, gold has been kept out of the tariff concession framework, meaning India’s import duties remain unchanged. The deficit reduction strategy, therefore, relies on boosting exports in other sectors like chemicals, apparel, and machinery, and diversifying trade with Switzerland beyond precious metals. 

Strategic Implications in a Fragmenting World 

The timing of TEPA’s implementation is strategically significant. In an era of geopolitical volatility and reshoring of supply chains, the pact serves as a stabilizing anchor for India in Europe. It provides Indian exporters with preferential access to a wealthy, stable market of over 13 million high-income consumers, offering a buffer against protectionism elsewhere. 

For EFTA, the agreement is a gateway to India’s vast consumer base and a chance to embed its companies in one of the world’s fastest-growing large economies. The focus on sustainable development and green technology collaboration also aligns with global climate goals, positioning EFTA as a partner in India’s clean energy transition. 

Perhaps most importantly, TEPA sets a new benchmark for India’s future trade negotiations, particularly with the larger European Union, where talks are ongoing. It demonstrates India’s evolving confidence: no longer just a rule-taker seeking market access, but a rule-maker demanding tangible investments and technology transfer in return. 

The Road Ahead: From Signature to Tangible Outcomes 

The promise of TEPA is immense, but its realization is not automatic. Several challenges loom: 

• Delivering the Investment: The $100 billion pledge, while legally novel, relies on mobilizing private capital. Its success depends on the attractiveness of individual projects and the efficiency of the India-EFTA Desk. 

• Managing Domestic Competition: Indian manufacturers in sectors like machinery and medical devices will face stiffer competition from high-quality EFTA imports as tariffs fall. The phased reductions are a critical buffer, but industry adaptation is essential. 

• Navigating Non-Tariff Barriers: For Indian agriculture, gains may be limited by EFTA’s strict sanitary and phytosanitary (SPS) standards, which act as non-tariff barriers. 

• Balancing IP and Public Health: The IP chapter, while safeguarding India’s right to produce generics, includes provisions for test data protection that will require careful monitoring to ensure affordable medicine access is not compromised. 

For businesses on both sides, the imperative is to move quickly. Companies must conduct thorough audits of their supply chains and product origins to comply with rules of origin and claim tariff benefits. They must also track the complex, multi-year tariff elimination schedules to plan their market entry strategically. 

Conclusion: A Partnership of Modern Ambition 

The India-EFTA TEPA is more than a trade pact; it is an instrument of strategic trust. It captures the essence of a modern economic partnership that is ambitious, forward-looking, and consciously balanced. By tying investment to market access, it seeks to ensure that globalization yields concrete, equitable dividends. 

Its ultimate legacy will be determined not in trade ministries but in factory floors, R&D centers, and emerging industrial clusters across India and Europe. If its innovative framework delivers on its dual promise of prosperity and development, it will stand as a powerful model for how developed and developing economies can build mutually beneficial bridges in an uncertain world.