India lures Swiss companies as $100 bn trade deal opens doors. Why more global firms are ditching China | Mint

Swiss companies such as the engineering group ABB and transport firm Kuehne Nagel are investing more in India. A $100 billion regional trade deal is expected to further open up the nation to businesses long geared towards China, Reuters reported on Monday, October 28.

India’s appeal has reflected a broader shift among businesses in Europe eager to balance the costs of a US-China trade spat and recognise that the Chinese economy is in comparison to India, losing steam, as per the report. 

The Trade and Economic Partnership (TEPA) signed in March with the European Free Trade Association (EFTA) is likely to provide an extra incentive to Swiss investment as it will cut tariffs on exports from chocolates to watches and machinery. Switzerland is the largest member of the EFTA.

Other members of the EFTA deal are Norway, Iceland and Liechtenstein. The organisation will invest $100 billion in India and will benefit from easier and cheaper access to the Indian market of 1.4 billion people. India expects the agreement to boost its exports of pharmaceuticals, clothing and machiney.

“India is now really booming,” Morten Wierod, chief executive officer of ABB, was quoted as saying in the report. The company is an electrical and industrial automation supplier. ABB has expanded in India after its orders increased by an average of 27 per cent annually in the last three years.

The company has been building factories, offices and showrooms in India and has completed eight projects since 2023. It has increased its workforce from 6,000 to 10,000 since 2020, as per the report.

“Our investments in India are supporting that growth, both with more local manufacturing, but with much more R&D so that you can make designs in India, for India,” he said.

Reduced Tariffs

According to the report, no company said that it was investing in India because of TEPA, which has yet to come into force, but the Swiss government and business advocates expect the deal will boost trade and investments.

TEPA requires parliamentary approval and is expected to become effective in either late 2025 or early 2026. 

India’s rapid growth is attracting the Swiss interest. China has long attracted more Swiss direct investment, but in 2021-2022 India took the lead, according to data from the Swiss National Bank cited by the news agency.

“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,” said Philippe Reich, chairman of the Swiss-Indian Chamber of Commerce.

TEPA will reduce tariffs on 94.7 per cent of exports to zero from an average of 22 per cent now, giving Swiss companies an edge over counterparts in the European Union and Britain, which are still negotiating agreements with India, business minister Guy Parmelin said.

In exchange, EFTA-based firms will be investing $100 billion over 15 years, which aims to create 1 million jobs as India has promised to provide a favourable investment climate. Both sides have agreed to identify investment opportunities and help companies deal with problems, as per the report. 

India on the Map

According to the report, Florin Mueller, the Head of the Swiss Business Hub, believes the TEPA would put India “on the map” for Swiss companies and roll out a “red carpet for them to come and invest.”

Smaller companies like Feintool are reportedly setting up ground as the precision component specialist is building its first Indian factory near Pune, which is to employ up to 200 people when it opens next year.

The plant will make parts for car seat reclining mechanisms. “We see huge potential in India,” Tobias Gries, Feintool’s India managing director, told the agency.

Although India bought only 1.5 per cent of total Swiss mechanical and electrical exports in 2023, its share grew nearly 8 per cent. 

Kuehne Nagel is increasing its India workforce to 4,800 from 2,850 since 2019, and is also opening new logistics centres in Chennai, Gurugram and Kolkata this year.

Kuehne Nagel’s India managing director Anish Jha said government schemes such as India’s National Logistics Plan, which has seen big investments in road, rail and ports, were helping.

The initiative is reducing transport costs, fuelling growth and supporting Kuehne Nagel, whose India revenues are rising at more than double the rate of the group overall. “We see significant growth in India and we are committed to increasing our presence here,” Jha was quoted as saying in the report.