India signs trade agreement with EFTA: Why it marks a shift, could be a template for bigger deals

With the EFTA being the first set of European countries to sign a deal with the investment commitment, the pact could serve as a template when dealing with developed nations who will have greater market access in a high tariff country like India and have investments to offer.

A number of multilateral trade deals such as the Regional Comprehensive Economic Partnership (RCEP), and bilateral deals such as the FTA with the EU, the UK and Australia were negotiated for years, but were abandoned as Indian industry resisted competition and sought a greater level of protection rendering the economy uncompetitive. The EFTA deal was also picked up after extended rounds of negotiations.

India had planned to sign a trade deal with Gulf Cooperation Council (GCC) countries comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. But more members brings more complexity and with geo-political tensions on the rise in West Asia, there is uncertainty over the deal’s course.

While there are concerns on how the legal agreement between the two sides will spur private investment, India has been able to signal greater openness for business and investment that has been missing for the better part of the last decade.

That said, the investment commitment in the EFTA deal excludes crucial pension and wealth funds that could have given greater confidence to investors. “For greater certainty, parties recognise that sovereign wealth funds are excluded from the promotion obligations undertaken by the EFTA states,” the EFTA agreement said.