Context
The European Free Trade Association (EFTA) has recently agreed to invest $100 billion in India over 15 years which is likely to be announced within a month.
About FTA
- The sectors wherein EFTA will be investing are pharma, food processing, engineering and chemical.
- The proposed deal will see India eliminate its obligation for an extensive range of products which includes gold, machinery, and prescription drugs, from EFTA countries.
- The funding commitment that has been agreed will largely come from provident funds (PFs) in EFTA countries.
About European Free Trade Association (EFTA)
- The European Free Trade Association (EFTA) is the intergovernmental organisation of Iceland, Liechtenstein, Norway and Switzerland.
- It was set up in 1960 by its then seven Member States for the promotion of free trade and economic integration between its contributors.
- Trade with India: India’s exports to the EFTA bloc in 2023 have been at $1.87 billion, with items inclusive of chemical compounds, pharmaceuticals, apparel and pearls, valuable & semi-valuable stones.
- It imported goods valued $20.45 billion from the EFTA nations in 2023 with inflows of pearls, valuable or semi-treasured stones, treasured metals, and coins valued $16.7 billion.
Significance
- Diversification of Imports: India typically depends on Chinese imports in strategically important sectors consisting of chemical and pharma sectors to fulfill domestic demand and satisfy export orders.
- It imported $3.4 billion worth of medical and bulk pills well valued at almost $7 billion.
- The deal will help India diversify its pharma and chemical imports away from China, dependence on which has been a protracted status difficulty.
- Better Standardised Devices: As Switzerland mainly exports higher popular pharma and medical devices to India, obligation elimination under the deal should assist EFTA countries compete with Chinese merchandise, consequently assisting India diversify faraway from cheap quality Chinese products.
- Investment and Employment Generation: This is the first FTA for India wherein it has been capable of getting a dedication on investment and employment from the partner countries producing an anticipated 1 million jobs.
Concerns
- Trade Deficit with Switzerland: During the closing economic year, India’s imports from Switzerland stood at $15.79 billion, in stark evaluation to its exports of $1.34 billion, leading to a tremendous trade deficit of $14.45 billion.
- The proposed deal will see India take away its obligation for a huge variety of products from EFTA countries which is possible to boost the alternate deficit.
- Tariffs on Agricultural Produce: India faces difficulties in exporting agricultural produce to Switzerland because of a complicated net of tariffs, satisfactory standards, and approval requirements and that EFTA has proven no inclination to make agriculture price lists zero on most basic agricultural produce.
- Elimination of Import Duties in Switzerland: Its decision to eliminate import duties on all business goods for all countries, effective from January 1, 2024, diminishes the advantages India may want to benefit from the FTA.
- Divergent Regulatory Standards: Harmonizing standards associated with product exceptional, safety, and environmental rules is essential for smooth alternate, and differences may additionally lead to extra compliance prices for organizations.
- Intellectual Property Rights (IPR): Both parties need to agree on the standards and enforcement mechanisms for patents, copyrights, emblems, and other highbrow assets issues.
Way Ahead
- The potential advantages of FTA between India and EFTA states are significant.
- The settlement will foster a robust partnership and boom trade between relied on democratic partners that share values which includes promoting sustainable development and gender equality.
Source: The Indian Express
UPSC Prelims Practice Question
Q.Consider the following countries: (2018)
- Australia
- Canada
- China
- India
- Japan
- USA
Which of the above are among the ‘free-trade partners’ of ASEAN?
a. 1, 2, 4 and 5 b. 3, 4, 5 and 6
c. 1, 3, 4 and 5 c. 2, 3, 4 and 6
Ans – “c”
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