The India-EFTA partnership, one plus one equals three

International Relations · 1 October 2026 · Based on The Hindu (original report)

2-minute summary

The Trade and Economic Partnership Agreement (TEPA) between India and the four European Free Trade Association (EFTA) states—Iceland, Liechtenstein, Norway, and Switzerland—entered into force on October 1, 2025. Marking its first anniversary, the agreement represents a paradigm shift in trade pacts by incorporating a dedicated chapter on investment and job creation, targeting $100 billion in investments and one million direct jobs in India over 15 years. Beyond tariff reductions, the partnership unlocks critical technological collaborations. Iceland is partnering with India on direct-use geothermal energy—demonstrated by a fruit-drying and cooling facility in Kinnaur, Himachal Pradesh—and Carbon Capture, Utilisation, and Storage (CCUS) technology. Iceland's 'CarbFix' technology, which mineralizes dissolved CO2 into basaltic rock within two years, holds immense potential for India's Deccan Trap basalts. Additionally, the partnership strengthens India's Arctic stewardship and energy security along its northern frontiers.

Why it's in the news

The article marks the first anniversary of the entry into force of the India-EFTA Trade and Economic Partnership Agreement (TEPA) on October 1, 2025. It analyzes the progress, focusing on technological collaborations in geothermal energy, carbon capture, and Arctic cooperation.

Facts to remember

The India-EFTA Trade and Economic Partnership Agreement (TEPA) entered into force on October 1, 2025.
EFTA consists of four member states: Iceland, Liechtenstein, Norway, and Switzerland.
Under TEPA, EFTA states aim to invest $100 billion in India over 15 years and facilitate one million direct jobs.
EFTA offered tariff concessions on 92.2% of its tariff lines, while India granted concessions on 82.7% of its tariff lines.

Background and context

The European Free Trade Association (EFTA) was established in 1960 as an alternative trade bloc for European states that chose not to join the European Economic Community (now the EU). Unlike the EU, EFTA is not a customs union, allowing its members to negotiate independent free trade agreements. India and EFTA launched negotiations for a Trade and Economic Partnership Agreement (TEPA) in 2008. After multiple rounds of pauses and resumptions, the agreement was signed in early 2024 and entered into force in late 2025. TEPA is historic because it is the first free trade agreement where India successfully negotiated a legally binding commitment on foreign direct investment and employment generation linked to market access.

Constitutional provisions

Article 253 — Empowers Parliament to make laws for implementing international treaties, agreements, and conventions.
Article 73 — Defines the executive power of the Union, which extends to matters with respect to which Parliament has power to make laws, including international relations and treaty-making.

Committees and reports

NITI Aayog CCUS Policy Framework and Deployment Roadmap — Estimated that India could capture 750 million tonnes of carbon dioxide per year by 2050, highlighting the strategic need for technologies like Iceland's CarbFix.

Government schemes

National Mission on Strategic Knowledge for Climate Change (NMSKCC) — Under the Department of Science and Technology (DST), it supports R&D in climate technologies, including the CCUS roadmap published in December 2025.

International organisations

European Free Trade Association (EFTA) — An intergovernmental organization of Iceland, Liechtenstein, Norway, and Switzerland set up for the promotion of free trade.
Arctic Council — A high-level intergovernmental forum addressing issues faced by the Arctic governments and indigenous people. Iceland and Norway are members; India holds observer status.

Previous UPSC questions on this theme

Mains GS-3 2025 — What are the challenges before the Indian economy when the world is moving away from free trade and multilateralism to protectionism and bilateralism? How can these challenges be met?

Mains practice: The India-EFTA Trade and Economic Partnership Agreement (TEPA) marks a paradigm shift in India's approach to Free Trade Agreements by linking market access to investment commitments. Analyze.

The India-EFTA Trade and Economic Partnership Agreement (TEPA), which entered into force on October 1, 2025, represents a landmark departure from traditional Free Trade Agreements (FTAs). By partnering with the four EFTA states (Iceland, Liechtenstein, Norway, and Switzerland), India has pioneered a new model of economic diplomacy.

TEPA marks a paradigm shift through several key features:

• **Investment-Linked Trade**: For the first time, India has secured a dedicated chapter on investment and job creation. EFTA states have committed to targeting $100 billion in foreign direct investment into India over 15 years, aiming to generate one million direct jobs.

• **Asymmetric and Ambitious Concessions**: EFTA has offered tariff concessions covering 99.6% of India's export value (92.2% of tariff lines), while India has offered concessions covering 95.3% of EFTA's export value (82.7% of tariff lines), balancing domestic industry protection with high-value market access.

• **Technology and Green Energy Transfer**: The agreement moves beyond merchandise trade to foster deep technological partnerships. Iceland’s expertise in direct-use geothermal energy is already being deployed in Himachal Pradesh for agricultural cold storage, while its 'CarbFix' carbon mineralization technology offers solutions for India's Deccan Trap basalts.

• **Strategic Diversification**: In a highly fragmented global order, TEPA allows India to diversify its supply chains and secure advanced technologies in carbon capture (CCUS) and Arctic research, where Norway and Iceland are key players.

In conclusion, TEPA serves as a progressive blueprint for future FTAs. It shifts the focus from simple tariff reduction to long-term industrial, technological, and environmental co-development, proving that trade agreements can actively drive domestic capital formation and sustainable growth.

Prelims practice questions

Q1. Consider the following statements regarding the European Free Trade Association (EFTA): 1. It is a regional trade organization and free trade area consisting of Switzerland, Norway, Iceland, and Liechtenstein. 2. Unlike the European Union, EFTA is not a customs union, allowing its member states to negotiate bilateral trade agreements independently. Which of the statements given above is/are correct?

1 only
2 only
Both 1 and 2
Neither 1 nor 2

Answer: C. Both statements are correct. EFTA was established in 1960 and consists of Iceland, Liechtenstein, Norway, and Switzerland. It is not a customs union, meaning each member state can maintain independent external tariffs and negotiate bilateral FTAs.

Q2. With reference to the Trade and Economic Partnership Agreement (TEPA) signed between India and EFTA, consider the following statements: 1. It is India's first free trade agreement that includes a legally binding commitment on investment and job creation. 2. Under the agreement, the EFTA states aim to invest $100 billion in India over a period of 15 years. Which of the statements given above is/are correct?

1 only
2 only
Both 1 and 2
Neither 1 nor 2

Answer: C. Both statements are correct. TEPA is unique because it contains a dedicated chapter on investment promotion, under which EFTA states aim to facilitate $100 billion in investments and create one million direct jobs in India over 15 years.

Q3. The 'CarbFix' project, recently in the news in the context of climate change mitigation, is primarily associated with which of the following technologies?

Bioenergy with carbon capture and storage (BECCS)
Direct air capture of methane
Mineralization of carbon dioxide in basaltic rocks
Ocean fertilization using iron filings

Answer: C. CarbFix is an Icelandic technology where carbon dioxide is dissolved in water and injected deep into basaltic rock formations, where it reacts to turn into solid stone (mineralization) within two years.

Revision flashcards

Which four countries constitute the European Free Trade Association (EFTA)? Iceland, Liechtenstein, Norway, and Switzerland.
What is the unique investment target committed under the India-EFTA TEPA? $100 billion investment in India over 15 years and the facilitation of 1 million direct jobs.
How does the 'CarbFix' technology store captured carbon dioxide? By dissolving CO2 in water and injecting it into basaltic rock, where it mineralizes into stone within two years.
Which Indian geological formation shares striking similarities with Iceland's volcanic basalt for carbon storage? The Deccan Trap basalts.
What is the significance of the Geotropy project in Kinnaur, Himachal Pradesh? It is an Indian-Icelandic venture utilizing direct-use geothermal energy for fruit drying and cold storage, helping local farmers.