India-EFTA Trade and Economic Partnership Agreement (TEPA)
This landmark agreement is a crucial topic for GS Paper II (International Relations) and GS Paper III (Economy, Investment).
1. Why in the News?
The India-European Free Trade Association (EFTA) Trade and Economic Partnership Agreement (TEPA) is set to come into force on October 1, 2025. Signed on March 10, 2024, this is a historic pact, being India's first FTA with a developed European bloc and uniquely linking trade with binding investment and job creation commitments.
2. Key Entities & Terminology
EFTA (European Free Trade Association): A regional trade organization and free trade area consisting of four European states:
Switzerland (Largest trade partner in the bloc)
Norway
Iceland
Liechtenstein
TEPA (Trade and Economic Partnership Agreement): A comprehensive FTA that goes beyond traditional goods and services to include investment, intellectual property, and sustainable development.
Unique Feature: Investment & Job Commitment: For the first time in an Indian FTA, EFTA has committed to a target of $100 billion in FDI and 1 million direct jobs in India over 15 years. This is a legally structured commitment, not a non-binding promise.
Foreign Direct Investment (FDI) vs. Foreign Portfolio Investment (FPI): The $100 billion commitment is for FDI (long-term, stable investment in physical assets and businesses), explicitly excluding FPI (short-term investment in stock markets), ensuring focus on productive capacity building.
3. Salient Features of the Agreement
| Aspect | Details |
|---|---|
| Market Access for Goods | EFTA to India: 92.2% of tariff lines (99.6% of India's exports). 100% non-agri products covered. India to EFTA: 82.7% of tariff lines (95.3% of EFTA's exports). Sensitive sectors like dairy, coal, and certain agricultural products are protected. |
| Services & Mobility | India offered 105 sub-sectors. Got better access in return (e.g., 128 from Switzerland). Improved access via Mode 4 (temporary movement of professionals). Mutual Recognition Agreements (MRAs) for professions like nursing, chartered accountancy. |
| Intellectual Property Rights (IPR) | Commitments are at the TRIPS (WTO) level. India's concerns on generic medicines and 'evergreening' of patents have been addressed, safeguarding the domestic pharma industry. |
| Sustainable Development | Includes chapters on environmental protection, social progress, and inclusive growth, aligning with global standards. |
| Sensitive Sector Protection | India has protected its PLI (Production Linked Incentive) sectors like pharmaceuticals, medical devices, and processed foods. Sensitive agricultural products (dairy, soya) are also shielded. |
4. Sector-Wise Opportunities for India
Agriculture & Processed Foods: Duty-free access for Basmati rice, processed foods, guar gum, grapes, mangoes, and millets. This helps diversify India's export basket beyond guar gum.
Marine Products: Tariff elimination on shrimps, prawns, and fish feed in Norway and Iceland will boost competitiveness.
Textiles, Leather, Sports Goods: Zero-duty access and streamlined compliance will help Indian products compete in these high-value markets.
Engineering Goods: Significant potential in electric machinery, aluminum products, and precision engineering items for Norway and Switzerland.
Electronics & Software: A strategic springboard for MSMEs and OEMs in areas like medical electronics (Switzerland), EV components (Norway), and industrial electronics (Liechtenstein).
Services (IT, Business, Audio-Visual): Enhanced access through digital delivery (Mode 1) and commercial presence (Mode 3) is a major boost for India's strong services sector.
5. Strategic Significance for India
Diversification of Trade Partners: Reduces reliance on traditional partners and integrates India with a high-income, developed European bloc.
Boost to "Make in India" and Atmanirbhar Bharat: The massive $100 billion FDI commitment is a direct catalyst for domestic manufacturing and job creation.
Gateway to European Markets: EFTA, though small, has high per-capita income. Success here can be a template for a future deal with the larger European Union (EU).
Technology & Skills Transfer: Facilitates collaboration in precision engineering, health sciences, and renewable energy, bringing world-leading technologies to India.
Balanced Agreement: India has successfully protected its sensitive sectors (agriculture, dairy) and red lines in pharmaceuticals (IPR), demonstrating sophisticated negotiation skills.
6. Probable UPSC Questions
A. Prelims (Factual)
Consider the following statements about the India-EFTA TEPA:
It includes a commitment for Foreign Portfolio Investment (FPI) into India.
It is India's first trade agreement with a European bloc.
The EFTA member countries include Switzerland and Norway.
How many of the statements given above are correct?
a) Only one
b) Only two
c) All three
d) None
Answer: b) Only two (Statement 1 is incorrect as the commitment is for FDI, not FPI).Which of the following is NOT a member of the European Free Trade Association (EFTA)?
a) Iceland
b) Liechtenstein
c) Sweden
d) Switzerland
Answer: c) Sweden (Sweden is a member of the European Union, not EFTA).
B. Mains GS (Analytical)
GS Paper II (International Relations)
The India-EFTA Trade and Economic Partnership Agreement (TEPA) is a "model agreement" that breaks new ground. Discuss its distinctive features and strategic importance for India's economic diplomacy.
"TEPA successfully balances India's offensive interests in services and investment with defensive interests in agriculture and pharmaceuticals." Critically analyze.
GS Paper III (Economy)
The $100 billion investment commitment under TEPA has the potential to be a game-changer for the Indian economy. Examine the sectors that are likely to benefit the most and the associated challenges in realizing this investment.
How does the India-EFTA TEPA differ from a conventional Free Trade Agreement (FTA)? Evaluate its potential impact on India's exports and domestic manufacturing.
C. Interview
"Some critics argue that FTAs like the one with EFTA can harm domestic small-scale industries. What is your view on this?"
"How can India ensure that the promised $100 billion in investments under TEPA actually materializes on the ground?"
"This agreement is seen as a stepping stone to an India-EU FTA. What lessons from TEPA can be applied in those negotiations?"
No comments:
Post a Comment