Swiss Companies Increasing Investment in India with $100 Billion Trade Agreement

Investments from Swiss companies in India are seeing notable growth as leading firms like engineering giant ABB and transport firm Kuehne+Nagel increase their Indian operations. The development is bolstered by an upcoming $100 billion regional trade agreement aimed at deepening economic ties between India and the European Free Trade Association (EFTA), which includes Switzerland as its most prominent member.

The deal’s potential has stirred interest among Swiss businesses, many of which had traditionally focused on China, offering them a viable alternative market.

India’s expanding economy is making it an attractive investment destination for European businesses as they look to mitigate risks associated with U.S.-China trade tensions and China’s slower economic momentum.

The India-EFTA Trade and Economic Partnership Agreement (TEPA): A Game Changer

The Trade and Economic Partnership Agreement (TEPA) signed in March 2024, will reduce tariffs on Swiss exports to India, spanning products from chocolates to watches and machinery. Although the agreement awaits ratification and is expected to come into force by late 2025 or early 2026, its potential impact is already creating positive sentiment among Swiss investors.

European Free Trade Association EFTA's other members—Norway, Iceland, and Liechtenstein—alongside Switzerland, will benefit from enhanced trade terms. As the TEPA lowers barriers, Swiss companies will gain easier and more affordable access to India's vast consumer base of 1.4 billion people. For India, this partnership aligns with its objective to boost exports in pharmaceuticals, clothing, and machinery, key sectors for its economy.

Guy Parmelin, Switzerland’s business minister, affirmed that the deal would cut tariffs on 94.7% of Swiss exports to zero, offering an edge over companies from the European Union and Britain, which are still in the negotiation stages with India. Parmelin stated, “The TEPA will benefit everyone,” citing the advantage of reduced tariffs and streamlined administrative processes.

ABB’s Growing Footprint in India: A Testament to Demand Surge

ABB, a prominent Swiss electrical and industrial automation supplier, exemplifies the success of Swiss firms in India. The company has expanded its Indian workforce from 6,000 to 10,000 since 2020 and undertaken eight projects to enhance its infrastructure, including new factories, offices, and showrooms. This growth follows ABB’s orders in India rising by an average of 27% annually over the past three years.

According to CEO Morten Wierod, “India is now really booming,” with ABB’s investments focused on building local manufacturing and research capabilities to create products tailored for the Indian market. Currently, India ranks as ABB’s fifth-largest market, with projections indicating it could rise to third place globally, trailing only the United States and China.

India’s Economic Surge Fuels Swiss Interests

India's economic growth is projected to outpace China's in the coming years, with IMF estimates suggesting 7% growth for India in 2024 and 6.5% in 2025. This exceeds China’s forecasts of 4.8% and 4.5% for the same years, making India a preferred destination for foreign investments, especially from Switzerland. Philippe Reich, chairman of the Swiss-Indian Chamber of Commerce, described the India-EFTA deal as a “game changer,” especially as challenges in China increase and economic growth there slows.

For Swiss businesses, which have traditionally prioritized China, India’s favorable trade terms and stable market dynamics present an attractive alternative. As Reich points out, “Doing business in China has become less easy as its economy there has been doing less well, and there is also the risk of large-scale conflicts – economic or otherwise – with China.”

TEPA: A Catalyst for Employment and Growth in India

Under TEPA’s terms, EFTA-based firms are expected to invest $100 billion over the next 15 years in India, a move aimed at generating 1 million jobs. While the specifics of India’s “favorable investment climate” remain unspecified, the agreement outlines collaborative measures to identify investment opportunities and resolve potential business challenges.

In anticipation of TEPA's ratification, 350 Swiss companies already operate in India, with more likely to join as trade and investment incentives align with growth opportunities. As Indian manufacturing sectors prepare for increased foreign involvement, TEPA is expected to further integrate Swiss companies into India’s vibrant economy, benefiting industries ranging from consumer goods to high-tech machinery.

Conclusion: A New Chapter in Swiss-Indian Trade Relations

With TEPA, India and Switzerland are poised to strengthen their trade relationship, opening doors for further economic collaboration. As European businesses seek more balanced portfolios and less dependence on China, India emerges as an increasingly attractive market for diverse industries. Platforms like ABB’s manufacturing expansion serve as examples of the kind of investments that may become more common as the $100 billion trade deal progresses.

India’s trade partnership with EFTA offers a significant opportunity for both sides to capitalize on growing economic trends, setting the stage for a period of mutual growth and new trade possibilities.