India is reportedly gearing up to link duty reductions tied to the trade agreement with the European Free Trade Association (EFTA) to investments made by companies from member nations, including Switzerland, Norway, Iceland, and Liechtenstein.
These countries collectively committed to investing $100 billion over 15 years. The Free Trade Agreement (FTA) is set to be signed on Sunday after clearance by the Union cabinet on Thursday evening. Negotiations for the agreement began in 2008 but paused after the Modi government took office in 2014.
In 2023, talks resumed as India ramped up its trade interactions with various nations, such as the UK, European Union, Mauritius, Australia, UAE, and Canada.
Potential Impact:
Switzerland has abolished import duties on industrial goods but maintained them on agricultural products. Proposed tariff cuts could affect items like watches, wine, chocolates, and machinery.
Regarding gold tariffs, a significant demand from the trading bloc, especially Switzerland, India will reduce the bound rate from 40% to 39%, with the effective duty remaining at 15%.
The government maintains its stance on intellectual property rights, stating that concessions related to data exclusivity aren't offered, though discussions on specific patent-related issues are welcomed. Swiss pharmaceutical companies strongly advocate for a more accommodating patent regime.
Trade agreements with Mauritius, Australia, and the UAE are finalized, while the one with Canada is delayed due to a diplomatic dispute. Progress on the proposed EU agreement is slow, and negotiations with the UK show India's firmness in safeguarding its interests before proceeding.
Similarly, the agreement with Oman is expected to take time as the commerce department has yet to finalize the proposal for cabinet approval.
Successfully concluding FTAs with developed countries like Switzerland and Norway would signal India's commitment to trade liberalization in a time when many countries are turning protectionist. However, limited gains on goods exports are cautioned against.
In the services sector, the agreement aims to open up sectors like IT, finance, tourism, and education, allowing Indian and EFTA service providers to operate in each other’s markets with fewer restrictions. Nonetheless, potential gains in services are limited, as countries typically agree to bind existing levels of policy commitments, implying a continuation of the status quo.
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