India-EFTA Deal at One Year: $100 Billion Investment Promise Slow to Show Up as Vietnam Signs Its Own EFTA Pact
Vietnam signed a free trade agreement with the European Free Trade Association (EFTA), a group of four European countries (Switzerland, Norway, Iceland and Liechtenstein), on 18 October 2026 in Hanoi.
Vietnam's talks with EFTA lasted about 14 years and concluded in July 2026. The deal covers goods, services, investment, intellectual property, government procurement, rules of origin, and trade and sustainable development. For example, over 98% of Norway's exports to Vietnam are to become duty-free within seven years of the deal taking effect.
India's own deal with EFTA, the Trade and Economic Partnership Agreement (TEPA), came into force on 1 October 2025. Its special feature is an EFTA aim to raise foreign direct investment (FDI) in India by $100 billion over 15 years and help create one million direct jobs.
One year on, the investment promise is slow to turn into visible projects. The pledge is an "aim" written into the treaty, it depends on private companies, and India's remedy if it falls short only becomes available after about 15 years.
With Vietnam now in the "EFTA club", Indian exporters and India's investment pitch face a strong Asian competitor for the same rich European market and the same European investors.
India-EFTA Trade and Economic Partnership Agreement (TEPA)
TEPA is a trade deal between India and the four EFTA countries: Switzerland, Norway, Iceland and Liechtenstein. Both sides cut import taxes on each other's goods and open up some services. Its most unusual feature is a written commitment by EFTA to aim for $100 billion of new FDI into India over 15 years. It was signed on 10 March 2024 in New Delhi and came into force on 1 October 2025.
The "slow to clear" worry is about TEPA's investment chapter. The target is legally written but is a "best effort" aim, so actual inflows depend on whether EFTA companies find India more attractive than rivals such as Vietnam, which now also has an EFTA deal.
Trade Creation and Trade Diversion: Who Really Gains From a Trade Deal
When two countries sign a free trade agreement (FTA), they cut tariffs (import taxes) only for each other. This can change who buys what from whom in two very different ways. Trade creation happens when the deal lets a country replace costly goods with cheaper goods from the partner, which is good for everyone. Trade diversion happens when the deal makes a country switch from a cheaper outside supplier to a costlier partner, only because the partner now pays no tariff. Whether a trade deal is truly beneficial depends on which of the two effects is bigger.
Vietnam's EFTA deal shows how trade diversion can work against India. Once Vietnam's goods enter EFTA markets on the same or better terms, India's relative advantage under TEPA shrinks. The same logic applies to investment: EFTA companies choosing between India and Vietnam will now compare two countries that both offer preferential access.
Bilateral Investment Treaty (BIT) and India's Model BIT (2016)
A Bilateral Investment Treaty is an agreement between two countries to protect each other's investors. It promises fair treatment and protection against unfair seizure (expropriation), and usually lets an investor take a dispute to international arbitration (a special tribunal of independent judges). Investors treat a BIT as a safety net before putting large, long-term money into a foreign country.
EFTA countries, especially Switzerland, have asked India for a BIT to help their companies deliver on TEPA's $100 billion goal. As of October 2026, no new India-Switzerland BIT has been signed. Investor protection is one reason the investment promise is slow to turn into real projects.
- Vietnam-EFTA FTA signed: 18 October 2026, Hanoi; about 14 years of negotiations; concluded July 2026
- Norway: over 98% of its exports to Vietnam duty-free within 7 years of entry into force
- EFTA members: Switzerland, Norway, Iceland, Liechtenstein; Stockholm Convention in force 3 May 1960
- India-EFTA TEPA: signed 10 March 2024; in force 1 October 2025
- TEPA investment aim: $100 billion FDI over 15 years ($50 billion in 10 years + $50 billion in next 5); one million direct jobs
- India-EFTA trade 2024-25: exports about $1.96 billion; imports about $22.4 billion (mostly Swiss gold)
- India terminated BITs with 58 countries in March 2017, including the 1997 India-Switzerland BIT
- Trade creation and trade diversion: Jacob Viner, 1950