In the midst of heat of President Trump’s tariff against series of countries, Switzerland ratifying India-EFTA Trade and Economic Partnership Agreement (TEPA) is an important development for India and Indian industry. The trade deal signed between India and four nations economic block EFTA, signed in March 2024 after nearly 16 years of negotiation, was waiting for Parliamentary ratification from Switzerland, Norway, Iceland, and Liechtenstein.
The trade deal with EFTA was more in the news because of the block’s promise to invest US$100bn in India over a period of 15 years rather than usual tariff reduction in any FTA negotiation. The trade agreement, which is expected to be operational in October 2025, has come at the most opportune time for India. In the last financial year 2024-25, India for the first time witnessed a drop in net FDI inflow though gross FDI at US$81.04bn remains very healthy.
The four EFTA nations and particularly Switzerland and Norway are known for high-tech and green field investment. According to fDiMarkets, the four EFTA nations have announced $20.3bn in greenfield FDI in India since records began in 2003. Switzerland alone is the source of $17.7bn of that, followed by Norway with $2.5bn. However, comparing it with Switzerland’s total FDI stock of CHF 1.3 trillion at the end of 2023, India’s share is minuscule.
In the year 2023 Swiss companies invested mainly in Europe (CHF 59 billion), the majority in the holding company locations of Cyprus (CHF 37 billion) and Luxembourg (CHF 18billion), followed by the UK (CHF 12 billion) and Germany (CHF 11 billion). Outside Europe, Swiss direct investments were made predominantly in the US (CHF 15 billion) and Asia (CHF 7 billion).
Swiss pharmaceutical companies are significant players in global FDI, particularly in the R&D, manufacturing, and commercialization of pharmaceutical products. Companies like Novartis, Roche, and others have established a strong presence globally, contributing to the Swiss economy and the global pharmaceutical landscape. Swiss pharma companies are actively investing in R&D outside of Switzerland, with the U.S. being a major recipient. They also have a presence in India, with some establishing R&D centers and engaging in collaborations with Indian companies. However, the scale of investment is not significant.
The TEPA once operationalised will provide an opportunity to India to attract Swiss FDI in R&D. Currently, India’s R&D investment as a percentage of GDP remains low compared to global leaders like China, the US, and Israel. India’s R&D expenditure remains around 0.65% of its GDP, while countries like China, the US, and South Korea spend significantly more, with figures ranging from 2.4% to 4.8%.
Deep Kapuria is the Chairman of The Hi-Tech Group of Companies comprising The Hi-Tech Gears, The Hi-Tech Engineering Systems, The Hi-Tech Robotic Systemz, and Novus Hi-Tech Robotic Systemz. The Group has manufacturing, R&D and engineering facilities in India, Canada and USA. He is also the Past Co-Chair of Digital Economy and Industry 4.0 Task Force of B20, 2018 Argentina and Past Co-Chairman, CII National Committee on International Trade & Trade Policy.
