The Pioneer | 22 November 2025

TEPA: A $100 billion carrot

by KS Chalapati Rao and KVK Ranganathan

When India signed the Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA), which include Switzerland, Norway, Liechtenstein, and Iceland, in March 2024, it was presented as a diplomatic triumph and hailed as a “template” for future free-trade agreements. After 16 years of negotiations, it promised to mobilise $100 billion in foreign direct investment (FDI), and create one million direct jobs over 15 years.

However, a close reading of TEPA’s investment chapter shows that these commitments are largely symbolic, a political gesture designed to justify the market-access concessions India granted to EFTA’s exporters. Far from guaranteeing new capital or technology, the $100 billion figure rests on imprecise statistical assumptions, generous escape clauses, and a framework that shifts responsibility onto India.

EFTA’s historical record makes this target implausible. Between 2000 and 2024, the reported FDI from the four EFTA members amounted to $11.8 billion, with an average annual inflow of about $860 million in the past decade. To meet the TEPA target, annual inflows will need to increase more than seven-fold. The post-signing data hardly inspires confidence. In the last 12 months following TEPA’s conclusion, inflows added up to a mere $334 million, far below the past average.

The empirical basis used to project a surge is shaky. One-off transactions, such as the 2021 restructuring of the German Bosch Group’s ownership through a Swiss holding company, which was worth over $4 billion but involved no new capital, inflated Switzerland’s figures. Excluding such flows, the EFTA’s past annual investment averages around $400 million, implying a future scale-up of more than 16 times.

Even more troubling is the nature of EFTA’s investment in India. During 2015-2024, only about one-third of real FDI went into manufacturing, the sector India hopes to benefit from advanced technology. In contrast, financial and insurance activities surged, surpassing manufacturing after 2020. Furthermore, acquisitions dominate new production facilities in Switzerland’s global investments, thus adding little to productive capacity or employment.

Equally worrying is TEPA’s explicit exclusion of binding technology transfer obligations. The agreement states that “technology collaboration does not require technology transfer.” This allows foreign affiliates to operate as perpetual licensors rather than partners in capability building in local entities. Swiss multinationals in India illustrate the cost. Thus, India exports profits, and perpetually pays for technologies that the dividends contribute to develop.

TEPA’s investment promises are cushioned by a series of strategic-escape clauses. The most striking one allows the EFTA to count investments by companies headquartered elsewhere, provided they have a “substantial presence” in an EFTA country, a term left conveniently undefined. This means that American or German investments routed through Zurich can be claimed as part of the $100 billion target.

Besides an “exigency clause” covering pandemics, wars, and other disruptions, the targets themselves are explicitly conditional on India maintaining an average nominal GDP growth rate of 9.5 per cent in dollar terms. If India falters, the commitments can be revised downwards.

Even India’s supposed safeguard, i.e., the right to apply “temporary and proportionate remedial measures” if targets are missed, is powerless. The process requires multiple consultation rounds, and a three-year grace period, effectively preventing India from acting for two decades after the agreement comes into force. The investment commitment is open-ended as the consultations will continue until the targets are met or revised downwards.

The promise of one million new direct jobs fares no better. Swiss MNC groups employ approximately 2.5 million people worldwide, of which the manufacturing sector is stagnant at approximately 1.4 million during the past decade. Expecting a million additional jobs in India is unrealistic. Moreover, because most EFTA investments take the form of acquisitions, any associated employment largely reflects existing workers being transferred to the new owners, not new hires. Without a reliable system to measure the jobs created, the TEPA employment target remains unverifiable.

TEPA’s weaknesses reflect a broader policy blind spot in India’s FDI strategy: A fixation on quantity rather than developmental quality. Since liberalisation, governments have celebrated large inflows without assessing their technological or employment impacts. Now, massive repatriations are portrayed as signs of investor confidence when they predominantly reflect the volatility of financial capital.

While India rightly resisted the Investor-State Dispute Settlement mechanism in TEPA, EFTA has pushed for separate “modern bilateral investment treaties” to provide investors with additional protection. If India concedes, it will reintroduce the arbitration risks it seeks to avoid. The EFTA has hinted at a higher $250 billion target in return for data-exclusivity provisions that can cripple India’s generic-drug industry, and is a dangerous trade-off of public interest for illusory capital promises. The Swiss are exploiting India’s vulnerability, or its persistent eagerness to showcase large FDI inflows. Swiss officials have clarified unequivocally that the $100 billion pledge is not legally binding, as their governments cannot compel private companies to invest.

India did try to restrict market access to EFTA in respect of certain products including dairy products. But with Switzerland facing a glut due to the US tariffs, and the weak dollar, and as they are aiming to push exports to China, India, and Latin America, they are likely to dangle carrots in the form of higher investments. In that case, instead of going by their oral promises, India needs to alter the conditions, and concede access to products which are least harmful to domestic producers.

As TEPA’s Investment Sub-Committee begins work in a few months, India must seize the initiative to protect its developmental objectives. India needs to insist on three minimums: · Only fresh capital for greenfield projects will be eligible for the target; acquisitions and financial restructuring must be excluded

· Investments in non-financial sectors will be treated as portfolio investments

· Assessment of the investment target will be based solely on net FDI inflows, after excluding notional and non-genuine entries

· Limit recognition to EFTA-headquartered investors bringing proprietary technology, not third-country funds routed through Switzerland

· Create a joint mechanism to track technology transfer, job creation, and net capital flows

Unless such safeguards are built in, TEPA will stand as a $100 billion carrot with India armed with no stick worth its name—a model of how not to negotiate investment chapters in future trade deals. If India wants FTAs to serve its developmental goals, it must insist on quality over quantity, ensuring that FDI contributes to building domestic capacity.

Rao is senior research fellow at the Academy of Business Studies, and Ranganathan is an independent researcher; views are personal