EFTA-India TEPA: $100B FDI Pledge Implications

Why the EFTA-India TEPA Changes the Game for European Investors

On March 10, 2024, India signed its most consequential trade agreement in a decade. The Trade and Economic Partnership Agreement (TEPA) with the four EFTA states—Switzerland, Norway, Iceland, and Liechtenstein—entered into force on October 1, 2025, after 16 years of intermittent negotiations that began in 2008. For the first time in the history of free trade agreements anywhere in the world, a binding investment commitment of USD 100 billion and one million direct jobs has been embedded directly into a trade pact between sovereign nations.

This is not a memorandum of understanding or a political promise. It is a legally enforceable obligation with a clawback mechanism that allows India to withdraw tariff concessions if the investment targets are not met. For European companies evaluating India market entry, TEPA fundamentally reshapes the risk-reward calculus by providing treaty-level certainty that both sides are committed to deepening economic ties over the next 15 years.

To put the scale in perspective: the combined GDP of the four EFTA states exceeds USD 1.1 trillion, with Switzerland alone accounting for roughly USD 870 billion. India's GDP of roughly USD 4 trillion makes this a partnership between some of Europe's wealthiest per-capita economies and the world's fourth-largest economy by nominal GDP. The trade relationship before TEPA was modest—bilateral goods trade between India and EFTA stood at roughly USD 25 billion in 2023-24—but the agreement is designed to multiply that figure dramatically through both tariff liberalization and investment-driven supply chain integration.

The $100 Billion Investment Commitment: Structure and Timeline

The investment pledge under Article 7.1 of TEPA is structured in two distinct phases with clear milestones:

The commitment is not limited to government-to-government transfers. It encompasses private sector foreign direct investment (FDI) from EFTA-based companies into India, tracked and verified through an Investment Sub-Committee (ISC) comprising government representatives from both sides. The ISC will conduct periodic reviews to assess whether investment flows are on track and whether facilitation measures taken by the EFTA states are adequate.

It is worth noting that EFTA companies—particularly Swiss multinationals—already have a significant presence in India. Nestle, ABB, Novartis, Zurich Insurance, and UBS all maintain substantial Indian operations. The TEPA commitment is expected to accelerate investments from mid-tier EFTA companies that have previously found India's regulatory complexity a barrier to entry. The Investment Facilitation Desk, operational since February 2025, serves as a single-window platform specifically designed to reduce these friction points for new entrants.

How the Clawback Mechanism Works

India negotiated a safeguard clause that is unprecedented in bilateral trade agreements. If the committed investments do not materialize as pledged, India reserves the right to revoke certain tariff concessions granted to EFTA nations under the agreement. The review is conducted by the ISC—not a judicial body—which provides India with diplomatic flexibility rather than litigation risk.

However, the legal standard is an obligation of conduct, not outcome. The EFTA countries must demonstrate they made honest efforts to facilitate USD 100 billion in investment. They are not strictly liable if the full amount falls short, provided genuine facilitation measures were undertaken. This distinction matters for corporate planning: the clawback risk is real enough to keep governments engaged, but the standard is achievable enough that individual company investments are not jeopardized by aggregate shortfalls.

Commerce Minister Piyush Goyal has publicly urged Indian industry to leverage TEPA actively, framing it as a two-way street: Indian companies should explore EFTA markets for exports while EFTA companies should view India as a preferred manufacturing and services hub. The government's position is clear—if the $100 billion target is met or exceeded, India will consider deepening concessions further in future review rounds.

Tariff Concessions: What EFTA and India Are Offering

EFTA's Offer to India

EFTA states have offered tariff elimination or reduction on 92.2% of tariff lines, covering 99.6% of India's export value to EFTA. This is one of the most generous market access offers India has received from any developed economy bloc. The key highlights include:

• 100% of non-agricultural products from India will enter EFTA markets duty-free, providing complete tariff-free access for manufactured goods
• Processed agricultural products (PAP) receive significant tariff concessions, opening European markets for Indian food processing companies
• Textiles, machinery, organic chemicals, and processed foods gain substantially improved market access, benefiting Indian exporters who previously faced MFN duty rates
• Gems and jewellery receive preferential treatment, which is significant given India's position as the world's largest diamond processing center

India's Offer to EFTA

India has opened 82.7% of its tariff lines covering 95.3% of EFTA's export value to India. This is a carefully calibrated offer that balances openness with domestic industry protection. Key aspects include:

• Gold imports (which account for over 80% of EFTA exports to India, largely routed through Switzerland) retain existing treatment to prevent disruption to India's gold import regime
• Sensitive sectors protected: dairy products, soya, coal, and specific agricultural goods are excluded from tariff liberalization to protect Indian farmers and domestic producers
• PLI-covered sectors like pharma, medical devices, and processed food have received calibrated treatment to preserve India's domestic manufacturing push under the Production Linked Incentive scheme
• Phased tariff reduction: Several tariff lines will see duties reduced gradually over 7-10 years, giving Indian manufacturers time to adjust to increased competition

Priority Sectors for EFTA Investment in India

The India-EFTA Investment Facilitation Desk, operational since February 2025, is channeling investments into four priority sectors that align with both EFTA expertise and India's industrial policy objectives:

1. Renewable Energy

Switzerland and Norway have deep expertise in hydropower, solar technology, and green hydrogen production. India's ambitious target of 500 GW of non-fossil fuel energy capacity by 2030 creates a natural alignment with EFTA capabilities. Norwegian companies like Equinor and Statkraft bring world-class experience in offshore wind and hydropower, while Swiss firms lead in solar inverter technology and energy storage solutions. EFTA companies can invest through the automatic route with 100% FDI permitted in the renewable energy sector, requiring no government approval.

2. Life Sciences and Pharmaceuticals

Switzerland is home to Novartis, Roche, Lonza, and other major pharmaceutical and biotech companies already operating in India. TEPA opens deeper collaboration opportunities in clinical research, biosimilars manufacturing, medical device production, and contract research and manufacturing services (CRAMS). India's pharmaceutical market is large and growing rapidly, and Swiss companies can leverage India's cost advantage for research and manufacturing while accessing both the domestic market and global supply chains. Foreign pharma companies entering India typically register as a wholly owned subsidiary or evaluate the branch office vs subsidiary structure based on their operational requirements.

3. Precision Engineering and Manufacturing

Swiss precision engineering is world-renowned, and India's manufacturing sector—boosted by the Production Linked Incentive (PLI) scheme across 14 sectors covering electronics, auto components, textiles, pharma, and more—offers significant scale advantages. Companies can leverage India's manufacturing labor costs — a fraction of Swiss wage levels — while accessing the domestic market of 1.4 billion consumers. The Make in India initiative provides additional incentives including simplified land acquisition procedures, single-window clearances, and dedicated industrial corridors.

4. Digital Transformation and Fintech

With India's Unified Payments Interface (UPI) processing over 14 billion transactions monthly and a mature digital infrastructure that includes Aadhaar-linked identity verification, India Stack APIs, and widespread smartphone penetration, EFTA fintech companies have a ready-made ecosystem for deploying digital financial services. The FDI advisory process for fintech involves both RBI and SEBI approvals depending on the specific business model—payment aggregation, lending, insurance distribution, and wealth management each have distinct regulatory pathways.

Services Trade: 128 Sub-Sectors Open for Business

TEPA is not just about goods—it represents one of the most comprehensive services trade agreements India has signed. India secured commitments across multiple service sub-sectors from all four EFTA states:

This creates near-complete services market access on both sides. Indian IT services, business process outsourcing, professional consulting, and financial services firms gain improved access to European markets, including provisions for mutual recognition of professional qualifications that facilitate easier movement of skilled professionals. On the other side, India's services sector opens to EFTA firms in areas like banking, insurance, telecommunications, engineering consulting, and environmental services.

The services chapter also includes provisions for temporary movement of business persons, which benefits both sides: Indian professionals can access EFTA markets for short-term service delivery, while EFTA companies can deploy specialists to their Indian operations more easily.

Sustainability and Labor Standards: India's First Binding Commitment

TEPA includes a dedicated chapter on Trade and Sustainable Development (TSD) with legally binding commitments on environmental protection and labor standards. This is the first time India has agreed to enforceable sustainability provisions in a trade agreement—a significant diplomatic concession that signals India's evolving approach to integrating ESG standards into its trade policy framework.

For EFTA companies, this addresses a key concern: ESG compliance in their Indian operations. European investors are increasingly subject to home-country ESG reporting requirements, including the EU Corporate Sustainability Reporting Directive (CSRD), which reaches many non-EU groups — Swiss companies among them — with significant EU operations or EU-listed securities. The binding nature of TEPA's sustainability provisions means Indian regulatory enforcement on labor and environmental standards will be subject to treaty-level oversight, providing an additional layer of assurance for European boards and investors who need to demonstrate due diligence across their global supply chains.

The chapter covers commitments on climate change cooperation, biodiversity protection, sustainable forestry and fisheries management, and adherence to core International Labour Organization (ILO) conventions. While enforcement mechanisms are diplomatic rather than punitive, the reputational and commercial implications of non-compliance provide meaningful incentives for both sides.

Practical Steps: How EFTA Companies Can Leverage TEPA

Step 1: Evaluate Entry Structure

The most common entry structures for EFTA companies investing in India are:

• Private Limited Company (wholly owned subsidiary)—the preferred route for most manufacturing and services investments, offering complete operational control and the ability to repatriate profits
• LLP—suitable for professional services and consulting firms, with simpler compliance requirements but restrictions on FDI under the automatic route for certain sectors
• Branch Office—for companies wanting to test the Indian market before committing to a full subsidiary, with the caveat that branch profits are taxed at 35% plus surcharge compared to 25.17% for domestic companies

Our entity structure comparison provides a detailed breakdown of costs, compliance, and operational implications for each structure.

Step 2: Confirm FDI Route and Sectoral Caps

Over 90% of sectors in India permit 100% FDI through the automatic route, requiring no prior government approval. Restricted sectors requiring government approval include multi-brand retail (51% cap), defence (up to 74% under the automatic route; government approval beyond 74%, up to 100% where modern technology is brought in), media and broadcasting (various caps from 26% to 100% depending on sub-sector), and print media (26% for news, 100% for non-news). EFTA investors must file FC-GPR with the RBI within 30 days of share allotment, reporting the investment details and share pricing.

Step 3: Navigate FEMA Compliance

All FDI into India is governed by FEMA regulations administered by the Reserve Bank of India. EFTA investors must ensure share pricing compliance (shares must be issued at fair market value certified by a chartered accountant or SEBI-registered merchant banker for unlisted companies), adhere to transfer pricing rules for all intercompany transactions, and file FLA returns annually by July 15. Our FEMA-RBI compliance services help foreign investors navigate these requirements efficiently and avoid penalties for delayed or incorrect filings.

Step 4: Leverage DTAA Benefits

India has comprehensive Double Taxation Avoidance Agreements with three of the four EFTA countries — Switzerland, Norway, and Iceland. With Liechtenstein, India has only a tax information exchange agreement, not a comprehensive DTAA, so Liechtenstein-based investors should plan for domestic Indian withholding rates or invest through a treaty jurisdiction. The DTAA provisions reduce withholding tax on dividends, interest, and royalties—significantly lowering the effective tax burden on cross-border transactions. Swiss companies, for example, benefit from a 10% withholding rate on dividends compared to the standard 20% domestic rate. Norwegian companies similarly benefit from reduced rates on technical service fees and royalties. Proper DTAA planning at the structuring stage can save EFTA investors significant amounts over the life of their Indian operations.

TEPA in the Broader Context: India's FTA Strategy

TEPA is part of India's accelerating trade agreement strategy. In January 2026, India concluded a landmark Free Trade Agreement with the European Union—a far larger trading partner—which now awaits ratification and entry into force. The India-UK CETA entered into force on 15 July 2026, and the India-UAE CEPA (2022) and India-Australia ECTA (2022) are already in force. India is also negotiating trade agreements with the GCC, Chile, Peru, and other partners.

For EFTA companies, this means India is becoming increasingly integrated into global trade networks, reducing the historical perception of India as a protectionist market. Companies that establish operations in India now will be well-positioned to serve not just the Indian domestic market but also to export to partner countries under India's growing network of preferential trade agreements.

The TEPA also provides EFTA companies with a competitive advantage over companies from countries without FTAs with India. While competitors from the US and China face standard MFN tariffs (Japan has its own CEPA with India), EFTA companies benefit from preferential rates that can mean significant cost savings on imported inputs and capital goods.

Key Takeaways

• Legally binding commitment: The $100 billion FDI pledge is enforceable with a clawback mechanism—not just a political announcement. India can revoke tariff concessions if investment targets are not met
• Phased investment: $50 billion in years 1–10, $50 billion in years 11–15, with one million direct jobs targeted across manufacturing, services, and technology sectors
• Near-complete market access: 99.6% of India's exports to EFTA become duty-free; India opens 82.7% of tariff lines to EFTA, with sensitive sectors like dairy and gold carefully protected
• Four priority sectors: Renewable energy, life sciences, precision engineering, and digital transformation are the primary investment channels, supported by a dedicated Investment Facilitation Desk
• First-ever sustainability chapter: Binding ESG commitments reduce regulatory risk for European investors in India and support home-country reporting requirements
• Competitive advantage: EFTA companies gain preferential tariff access that competitors from non-FTA countries do not enjoy, creating a structural cost advantage for India-based operations