India–EFTA
TEPA’s $100 Billion FDI for India is non-binding, Promise
for 1 Million Jobs is an Illusion?
With the India–EFTA Trade and
Economic Partnership Agreement (TEPA) taking effect on 1 October 2025, claims
of $100 billion in investment and 1 million new jobs over 15 years are facing
scrutiny. An analysis by K.S. Chalapati Rao and K.V.K. Ranganathan finds that
these figures are aspirational rather than binding and rest on fragile
assumptions.
EFTA’s investment pledge was
reportedly added late in negotiations to expedite the deal before India’s 2024
elections. Swiss officials themselves have clarified that the commitments are non-binding,
depend entirely on private-sector initiative, and lack enforcement mechanisms.
Historical data reinforce skepticism: EFTA’s cumulative FDI in India since 2000
totals under $11 billion, dominated by a few one-off transactions and not
sustained inflows. Much of the capital movement involves portfolio flows,
acquisitions, and divestments—not fresh greenfield investment. Swiss
outward FDI trends also show retrenchment and a shift toward services and
financial sectors rather than manufacturing.
The authors highlight ambiguities
in TEPA’s investment chapter—including unclear definitions of FDI versus
portfolio investment, provisions allowing EFTA to dilute commitments, and
clauses enabling investments routed through non-EFTA companies to count toward
the target. Job projections are even less credible: Swiss-controlled firms
employ fewer than 100,000 people in India, making a tenfold expansion
implausible.
They warn that India could be
pressured to re-introduce investor-state dispute settlement (ISDS)
mechanisms through bilateral investment treaties and to relax
intellectual-property protections, in exchange for inflated promises of higher
investment.
To safeguard national interests,
the authors urge India to:
·
Prioritize
manufacturing, technology transfer, and greenfield ventures;
·
Exclude
mere acquisitions or non-EFTA investments from FDI tallies;
·
Strengthen
corporate disclosure and statistical systems for accurate FDI tracking; and
·
Resist
pressures to sign new BITs that could undermine regulatory autonomy.
Ultimately, TEPA guarantees market
access for EFTA exports but leaves India with conditional and uncertain
investment promises—a lopsided arrangement that, the authors argue, may
deliver more rhetoric than results.
$100 bn FDI under India-EFTA TEPA: A Fact Check
Article
prepared by K.S. Chalapati Rao & K.V.K. Ranganathan
With the Trade and Economic Partnership Agreement (TEPA) between India and
the European Free Trade Association (EFTA) coming into effect on 1 October
there is renewed buzz around the promised $100 billion investment and the
creation of 1 million additional jobs in India over 15 years. Last year, the parties “raced
against the clock” to sign the agreement on 10 March 2024 just days before the
announcement of India’s general elections. The investment chapter was a late
addition to the TEPA. The EFTA had to make investment and employment commitments only to facilitate the
conclusion of the agreement before the call for India’s general elections, as
the last phase of the negotiations indicates. EFTA members knew that their
companies would not be able to invest the targeted amount. Understandably, the
EFTA managed to insert safety valves into TEPA. The fine print of the agreement
which has been mostly overlooked, statements of the Swiss authorities, and
empirical data point to a not-so-optimistic outcome.
In her interview with @indianexpress following the coming into effect of
TEPA, @SECO_StateSec made some pertinent points:
(https://indianexpress.com/article/business/india-efta-deal-strengthens-rule-of-law-amid-growing-global-trade-uncertainty-switzerlands-state-secretary-for-economic-affairs-10287271/?ref=newlist_hp)
“First, we will have Swiss companies that will simply want to export their
products to India. Others may aim to serve the Indian market more directly,
perhaps not necessarily by manufacturing entire machines locally, but by
providing services such as repair and maintenance. In fact, these services
often generate significant added value, as they require training local people,
ensuring long-term support. Finally, you’ll have those companies that will set
up shop to serve the region, to serve the continent, (and) to serve the world.”
Therefore, exports to India and the
service and maintenance of imported equipment are more certain than setting up
new facilities in India.
“My sense is that Swiss companies have understood the importance of being
present in large markets. So we are the sixth largest
FDI (source) in the US as well, and I believe that the investment now flowing
into India is not primarily intended for re-export to the US.”
Therefore, Swiss companies would not export to
major markets in India.
“I think what’s happening now — and we’ve had a bit of a late start with
India because India is only now opening up really and encouraging FDI… before
it was a rather closed market. I think there is great catch-up potential.
This is a gross misstatement of the
facts. India’s entire manufacturing sector has been open for 100% FDI since
2000 for two and a half decades. Only some further policy dilution was done in
the case of defence industries and in respect of brownfield investments in the
pharma sector in the past decade. India has allowed free entry into most
services for more than a decade.
“Switzerland would therefore welcome the opportunity to re-establish a
bilateral investment protection treaty. I would consider this a key element in
ensuring the best possible framework for action. If you read the TEPA, the
Swiss private sector committed $100 billion investment and 1 million jobs. In
turn, India committed to establishing optimal framework conditions for this
investment to smoothly and quickly happen. I’m happy to hear that the signals
coming from the Ministry of Finance are quite positive. We’ve been informed
that they are working on a model text, which is very encouraging. It’s
definitely something that we consider would be a key step now.”
Therefore, what India tried to avoid in TEPA by not
incorporating ISDS could be brought back in the bilateral investment treaties (BITs). Again, the Swiss private sector
did not commit to a $100 billion investment. It is a figure arrived at between
the two parties to save the agreement and give respectability to it, to prevent
the negotiations from further dragging on. EFTA reluctantly agreed to the
investment and employment targets to avoid a repeat of 2014, when the elections
came in the way and the negotiations were stalled. As has been
repeatedly stated and asserted in the debate on TEPA in the Swiss Parliament
and elsewhere, by the Swiss authorities, the private sector must take the
initiative and fulfil the targets.
In
a Q&A session, when asked whether it was a binding commitment or was on a
best-effort basis, @SECO_StateSec stated in March 2024 that
“No,
there is no mechanism in it, which makes it
tangible. It is not legally binding because it is the Swiss private sector that
will have to do the investment. … I can’t force a company to come and invest in
India.”
Now to Some Specifics
The feasibility of India attracting
such a large amount of FDI can be questioned because of several factors.
Historical data show that EFTA's total FDI in India has been less than $11
billion since 2000. While a very large portion of this came in the last decade,
much of it was in the form of one-off, large-sum inflows that do not represent
a consistent trend. Much of
the so-called investment consisted of extremely large notional transactions,
underestimated acquisition levels, and a clear shift away from manufacturing
toward services, and from real FDI to portfolio flows.
The three “peaks” of EFTA investment since 2015
tell the real story. One was a little more than a secondary market purchase of
shares worth $896 million. Another was an eye-popping $4,026 million notional
transaction, which was just a book entry. The third was the takeover of a
domestic company for $666 million. These three episodes together made up a
staggering 62 percent of EFTA’s total FDI inflows into India between 2015 and
2024.
Against this
backdrop, TEPA’s estimate of 13 percent FDI growth from ETFA — with projections
of 16 percent ahead — looks highly unattainable. After all, when a single
notional remittance of $4,026 million can skew the numbers, the narrative of
sustained growth becomes highly questionable.
Furthermore, the global outward FDI
flows from the EFTA have been erratic and even negative recently, with
Switzerland, the largest member, withdrawing massive amounts. Swiss global FDI
is characterised by acquisitions and by restructuring. Its outflows are buoyed
by reinvestments which do not provide fresh capital to host countries.
Additionally, in both EFTA's global investments and its investments in India,
the financial sector has gained importance, while the manufacturing sector has
declined or stagnated.
The investment chapter of TEPA is so convoluted
that even top-tier global consultants misread a footnote: even more than a year
after the signing, they continue to insist that EFTA investments in India are
required to yield 16 percent returns, while India itself must grow at 9.5
percent, for the targets to be met. (https://sicc.ch/event/tepa-webinar-series-from-pwc-unlocking-opportunities-for-swiss-and-indian-companies/)
The TEPA agreement contains several
ambiguities, which are unexpected and unacceptable in an international
agreement and could put India at a serious disadvantage.
§
The agreement
lacks clear definitions for key terms, such as "foreign direct
investment" and "portfolio investments”, and does not distinguish
between gross and net inflows. This could lead to acquisitions being counted as
fresh capital, even though they may not add new resources to the economy,
whereas divestments, which are alarmingly high in recent years, would not be
considered. It is surprising how persons in
authority from both sides lacked clarity.
§ India not only
follows a liberal FDI policy but also adopts a liberal definition of FDI. It
counts investments which would otherwise be portfolio investments if one goes
by the international norm of 10% ownership. Even otherwise, portfolio investors
(PE/VC/HF/SWF, banks, and other financial investors) account for a very high
share of India’s inward FDI. What is FDI for India could be portfolio
investment for Norway as it follows a 20% threshold for an FDI relationship.
A major case of divestment in the recent
past was the sale of ACC/Ambuja to the Adani Group. Statkraft of Norway announced
its intention to exit the solar
and hydropower sectors of India for approximately $2 billion. Statkraft’s total
investment in the Indian energy sector from 2006-07 to 2024-25 is approximately
$400 million. While the sale of MTF foods (Orkla India) of Norway to the ITC
group was rumoured, the company is expected to come out with an IPO to offer
part of the foreign promoter’s shareholding for sale for about $40 million.
Prior to filing the draft red herring prospectus. A little earlier, the Indian
subsidiary paid ₹ 540 crore to the parent company as a dividend.
Given the character of Swiss outwards FDI,
India should expect to witness major acquisitions and divestments. Is India
ready for it?
§ The agreement includes caveats that allow the EFTA to
scale down its commitments if certain conditions, such as India's past growth
rates, are not met. India is also required to offer a favourable investment
climate, the characteristics of which are not specified. Thus
the onus is in India to provide the necessary environment.
§ TEPA has a three-stage consultation process and a
three-year grace period for remedial action, which would not only push the
initiation of “temporary and proportionate” remedial action, again not defining
the same, to 20 years but would also perpetuate the fulfilment of the targets
until either they are met or downsized. In
reality, accountability can be postponed for decades.
§ EFTA planned to have a double advantage. While qualifying
investments by EFTA-headquartered companies for assessing the target, the
agreement allows investments from companies headquartered elsewhere but with a
"significant presence" in the EFTA to be counted toward the target,
without defining the same. This means that investments from US, German, and
Japanese companies routed through the EFTA could also be included, thus
essentially turning EFTA investments into global investments.
§ While the agreement mentions "technology
collaboration”, it specifically excludes mandatory technology transfer.
Collaboration is broadly defined as dialogue and information exchange, which
does not require a free trade agreement.
The job promises
under TEPA stretch credibility even further. EFTA’s pledge of one million new
direct jobs in India borders on fantasy when set against the numbers. Swiss
companies worldwide employed just 2.5 million people in 2023, and that figure
has grown by only half a million over the past decade — almost entirely in
services. Manufacturing employment, by contrast, has flattened. In India,
Swiss-controlled firms had fewer than 100,000 employees in 2022, with
headcounts rising or falling mostly due to acquisitions and divestments. For
that base to multiply tenfold in 15 years, especially if new investments come
from capital-intensive high-tech firms, is hardly realistic.
The EFTA is now trying to entice India
further by promising a total of $250 billion investment, provided India agrees
to data exclusivity in India’s IP laws. (https://money.rediff.com/news/market/india-eyes-250b-investment-from-efta-nations-goyal/34626920251001). When even the $100 billion investment is not
guaranteed, the promise of $250 billion is exaggerated, to put it mildly.
Tasks for India
To maximise the benefits of the TEPA, India should seek
greater clarity, insist on sectoral prioritisation, and place a premium on
manufacturing, greenfield projects, technology transfer, joint ventures with
domestic entrepreneurs, strong backward linkages, and exports. Investments that
do not meet these requirements, including those made by companies with
headquarters outside the EFTA, should not be counted towards the promised
target.
India should
resist the pressure to dilute its position in EFTA countries’ efforts to sign
BITs in the name of offering a favourable investment climate and giving comfort
to private investors and not allowing investment protection measures that it
has been trying to break free from.
India should develop a reliable statistical system that enables the
proper analysis of corporate behaviour beyond financial performance. Immediate
steps should be taken to repair and improve corporate disclosures. The Ministry
of Corporate Affairs, the Central Statistical Office, and the Reserve Bank of
India should work closely with the research community to identify disclosures
to facilitate policy-relevant analysis of the corporate sector, which is the
lead driver of the economy and where FDI occupies a significant place. Had such
a system not been neglected for decades, India would not have found itself in
this situation.
Ultimately, the TEPA model is flawed
because the EFTA cannot direct companies to invest in India, whereas India is
bound to adhere to the tariff reduction schedule and maintain a favourable
‘investment climate’ and high growth rate. It is also being pushed to enter
into BITs and stronger IP protection. While the EFTA secured market access for
its exports, the commitment to investment and job creation remains a promise.
One cannot help remembering the folk tale of a boy claiming to carry a hill
provided he is fed well.
(https://www.champak.in/stories/the-boy-who-could-carry-the-mountain-an-indian-folktale-kids-fiction)