While the India-EFTA free trade agreement promises huge investments and market access, the fine print shows New Delhi's hands may be tied when it comes to withdrawing tariff benefits. The $100 billion commitment from the European trading bloc depends on India sustaining a lofty 9.5% annual GDP growth rate over the next 15 years. If this target is not achieved, the pact allows India to “temporarily” rebalance concessions – but only after an extensive review process 18 years later.
The deal signed with Switzerland, Norway, Iceland and Liechtenstein recognizes India can adjust tariffs if promised investments fail to materialize. However, any such moves can only be short-term in nature. Multiple consultations across all levels of government must also be completed first. India's projected 4.1% average growth through 2023-24 calls into question whether the required high-flying economy can be sustained.
While market access and funding were touted as big wins, the small print leaves questions around flexibility. India may find withdrawal of tariff perks tightly restricted by countless reviews and discussions. Achieving a near-double digit growth rate each year could also be a big challenge. Only time will tell if this trade pact truly allows an escape clause if investment pledges are not kept as agreed.
