Experts have expressed apprehensions over the withdrawal of MFN impacting investment flows under the European Free Trade Association (EFTA).
India has the option of remedial actions, such as partial withdrawal of tariff concessions under the free trade deal recently inked with EFTA nations, if the bloc fails to meet its investment commitments.
EFTA includes Iceland, Liechtenstein, Norway and Switzerland.
Switzerland Friday suspended MFN status under its DTAA with India, in what could raise the tax outgo for Indian entities operating there.
India’s exports to the EFTA bloc in April-September FY25 were $1 billion and imports were $10.7 billion.
The Trade and Economic Partnership Agreement (TEPA) includes a binding commitment of $100 billion investment and the creation of one million direct jobs in India by companies from those four countries over the next 15 years. Such an investment commitment is a first for India. “The agreement provides for temporary remedial measures if the EFTA members don’t fulfil their investment commitment but this is a measure that can be used in the long run,” said an official. India has promised to reduce tariffs to zero on 80-85% of goods from EFTA countries while receiving duty-free market access for almost 99% goods including rice. Around 82% of India’s import from the four countries, especially from Switzerland, is gold but it has refused to reduce effective tariffs on gold, jewellery, dairy, cheese and automobiles.
The EFTA nations have committed $50 billion within 10 years and an additional $50 billion in the next five years. For the foreign direct investment (FDI) to materialise, India’s nominal gross domestic product needs to grow around 9.5% in dollar terms over the next 15 years. The investments do not cover foreign portfolio investments.
However, trade experts said Switzerland’s decision highlights broader issues in India’s approach to MFN clauses in bilateral treaties.
