Can binding investment and employment commitments in FTAs address India's concerns over past trade deficits with FTA partners? Discuss with reference to TEPA.

India still runs a trade deficit with its FTA partners, about USD 31 bn in Q2 FY26 alone [1]. This has led the government to review its FTAs with ASEAN, Japan and Korea [2]. The India–EFTA TEPA, in force since 1 October 2025, responds by linking market access to investment and jobs [3]. Such commitments can ease the deficit concern, but they cannot fully resolve it.

Why past FTAs caused concern

• Asymmetric gains: imports from FTA partners keep growing faster than India's exports to them [1].
• No quid pro quo: India opened its market without any promised capital, technology or jobs in return.

How TEPA's commitments help

• Capital for concessions: under Article 7.1, EFTA targets USD 50 bn of FDI in 10 years and another USD 50 bn in the next 5, with 1 million direct jobs [3].
• Productive capital only: portfolio investment is excluded, so the money must go into building productive capacity [4].
• Claw-back clause: India can withdraw benefits if the investment does not arrive. This is a first among trade agreements [5].
• Calibrated opening: India cuts duties on 82.7% of tariff lines but excludes dairy, soya, coal, pharma and medical devices [3].

Limits

• Soft wording: EFTA states "shall aim" to raise FDI [4]. Official releases call the target a "binding commitment" in one place [6] and an "objective" in another [7].
• Private choices: FDI comes from companies, and governments cannot order them to invest.
• The gold problem: over 80% of imports from EFTA are gold, and TEPA leaves its effective duty unchanged [6]. Investment cannot reduce a deficit driven by demand for gold.
• Costly remedy: using the claw-back would risk disputes with friendly partners.

Way forward

• The Department of Commerce should publish a yearly scorecard of EFTA FDI and jobs, measured against the Article 7.1 timeline [4].
• Carry the TEPA model into the EU talks, stating plainly whether the investment figure is binding.

Overall, linking investment to market access turns FTAs from tariff deals into development partnerships. With transparent monitoring and domestic reforms to improve competitiveness, TEPA can become a template for balanced trade that serves SDG 8 (decent work and economic growth).