India can withdraw tariff concessions if $100 bn investment doesn’t materialise: EFTA

New Delhi: The four-nation European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway and Switzerland, has guaranteed in writing that India can withdraw from the tariff concessions in the Trade and Economic Partnership Agreement (TEPA), signed on Sunday, if the $100-billion investment to help create a million direct jobs in the next 15 years doesn’t materialise, two officials aware of the matter said. This is a first for any free trade agreement signed by India.

“It is clearly mentioned in the agreement that India reserves the right to withdraw the tariff concessions if investments are not materialised within the stipulated timeline,” said one of the officials, who was part of the negotiating team. The clause will be reviewed in phases, starting with a $10 billion investment, the official added.

“We have offered the best deal and signed the treaty by keeping the interest of India’s domestic market at top priority. In the trade deal, duty free market access is allowed only for 1.5% of the EFTA’s total trade lines,” the second person said.

The agreement with EFTA is the third major trade deal finalised by the union government since early 2022. India has already signed bilateral agreements with the United Arab Emirates and Australia and is negotiating trade deals with the European Union, the UK, and several other smaller countries such as Oman and Peru, though those are unlikely to be finalised soon.

Mint reported on 7 March that the India-EFTA deal would be signed on 10 March after the draft agreement was taken up for approval by the union cabinet. Talks on the India-EFTA trade deal began in January 2008, but remained stalled for long.

According to government data, India’s exports to the EFTA region during January-December 2023 were worth $1.87 billion, while its imports were more than $20.45 billion, with Switzerland’s share alone pegged at $19,65 billion, owing to gold purchases.

India’s key imports from the four countries are gold ($20.7 billion in FY22), silver, coal, pharmaceuticals, vegetable oil, dairy machinery, medical items, crude and scientific equipment. It exports chemicals, iron and steel, gold, precious stones, yarns, sports goods, glassware and bulk drugs to these nations. Switzerland is India’s largest EFTA trading partner, followed by Norway.

Queries emailed to the commerce secretary and its spokesperson were not immediately answered.