India-EFTA Group Agreement

India-EFTA Group Agreement

GS-2: International Relations

(UPSC/State PSC)

Important for Prelims:

EFTA Group, Global Trade Research Initiative (GTRI), India TEPA.

Important for Main Exam:

About EFTA, Implications of EFTA-India TEPA Agreement, Conclusion.

11/03/2024

Why in news:

Recently, India and the EFTA group signed a bilateral free trade agreement to promote investment and two-way trade in goods and services.

Other points related to EFTA agreement:

  • This is India's first FTA with four European countries in which India has expressed its commitment to realize the potential in investment and employment.
  • EFTA group countries are considering investing in joint ventures in sectors such as pharmaceuticals, especially medical devices, certain chemicals, food processing and engineering products.
  • Under this, the EFTA group has committed to invest $ 100 billion in India in the next 15 years.
  • According to the economic research institute ‘Global Trade Research Initiative (GTRI)’, India has removed duties on Switzerland-based products in the last 10 years. It is noteworthy that some of the famous watch brands of Switzerland are Rolex, Omega and Cartier. Nestle, a Swiss brand, is a leading company and chocolate manufacturer in the Indian FMCG (household goods of daily use) market. It is the third largest listed company in the Indian FMCG sector.

Significance:

  • This agreement will help in increasing investment flow, employment generation and economic growth between the two countries.
  • This will give domestic customers access to products from countries in this group at lower prices.

About EFTA:

  • Intergovernmental Organization: The European Free Trade Association is an intergovernmental organization established to promote free trade and economic cooperation between its members within Europe and globally.
  • Objective: Deeper economic integration among its members, including a common customs union.
  • Member States: It has four member states: Iceland, Liechtenstein, Norway and Switzerland.
  • All of these countries are open, competitive economies committed to progressive liberalization of trade in the multinational sector as well as free trade agreements.

Historical Background of EFTA:

  • EFTA was established by the Stockholm Convention in 1960 as an alternative to the European Economic Community (EEC), the precursor to the European Union (EU).
  • Consultative Bodies: The EFTA Parliamentary Committee (PC) and the EFTA Consultative Committee (CC) are two important bodies of the EFTA Council.

About EFTA-India TEPA:

  • TEPA stands for Trade and Economic Partnership Agreement.
  • Objective: It aims to boost trade between the two regions by reducing tariffs on goods and services as well as promoting investment and cooperation.
  • EFTA Council: This is the supreme governing body of EFTA. The Council normally meets eight times a year at the ambassadorial level and twice a year at the ministerial level.
  • EFTA Secretariat: Headquartered in Geneva, it deals with the management and negotiation of free trade agreements with non-EU countries, and provides assistance to the EFTA Council.

Implications of EFTA-India TEPA Agreement:

  • Increase in trade: Reduction in tariffs and quotas on goods and services is likely to significantly increase trade between India and EFTA countries.
  • Investment Opportunities: This agreement can encourage more Foreign Direct Investment (FDI) into India from EFTA countries which will lead to creation of new businesses, technology transfer and infrastructure development in India.
  • The proposed free trade agreement is expected to lead to an investment flow of $100 billion from the Group of Four countries into India over the next 15 years, creating an estimated one million jobs.
  • Improved efficiency: Streamlined customs procedures and rules can make trade between India and EFTA countries more efficient and less time-consuming, benefiting businesses on both sides.
  • Reducing trade deficit: The trade agreement with EFTA is also likely to reduce India's huge trade deficit with the bloc.
  • India's exports to the EFTA bloc stood at $1.87 billion in 2023, with chemicals, pharmaceuticals, apparel and items such as pearls and precious and semi-precious stones dominating the export base.
  • On the other hand, it imported goods worth $20.45 billion from EFTA in 2023, including pearls, precious or semi-precious stones, precious metals and coins worth $16.7 billion.
  • India FTA negotiations with other countries: The signing of the India-FTA TEPA is likely to give a boost to India's ongoing FTA negotiations with other partners such as the EU and the UK.

Conclusion:

  • India has been working on a Trade and Economic Partnership Agreement (TEPA) with EFTA. TEPA will accelerate “Make in India” and “Self-reliant India” by encouraging domestic manufacturing in sectors such as infrastructure and connectivity, manufacturing, machinery, pharmaceuticals, chemicals, food processing, transport and logistics, banking and financial services and insurance.

Source: The Hindu

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Mains Question:

What is EFTA? Discuss the implications of the EFTA-India TEPA agreement.