Swiss companies set sights on India as $100 bln trade pact promises more opportunities

Feintool International Holding AG

28/10/2024 06:05

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      EFTA countries have signed free trade agreement with India
    

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      Deal includes pledge to invest $100 billion in India
    

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      Companies looking to benefit from India's strong economic
growth
    

  
    By John Revill
       ZURICH, Oct 28 (Reuters) - Investments in India by Swiss
companies such as engineering group ABB  ABBN.S  and transport
firm Kuehne+Nagel  KNIN.S  are on the rise, with a $100 billion
regional trade deal expected to further open it up to businesses
long geared towards China.
    India's appeal has already reflected a broader shift among
businesses in Europe eager to balance the costs of a U.S.-China
trade spat and recognition that the Chinese economy is, by
comparison to India, losing steam.
    But the trade and economic partnership (TEPA) signed in
March with the European Free Trade Association, whose biggest
member is Switzerland, is likely, when ratified, to provide an
extra incentive to Swiss investment as it will slash tariffs on
exports from chocolates to watches and machinery.
    Under the deal, EFTA, whose other members are Norway,
Iceland and Liechtenstein, 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 machinery.
    "India is now really booming," said Morten Wierod, CEO of
ABB, an electrical and industrial automation supplier expanding
its Indian footprint after its orders there increased by an
average of 27% per annum in the last three years.
    To meet demand, ABB has been building factories, offices and
showrooms in India, with eight projects completed since 2023,
increasing its workforce from 6,000 to 10,000 since 2020.
    Now ABB's number 5 market, India is on track to become its
third biggest after the U.S. and China in a few years, Wierod
said.
    "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.
    Although India is gaining importance, ABB is still committed
to China, Wierod said, a view shared by other companies Reuters
spoke to.
    
    TARIFFS REDUCED
    No companies Reuters spoke to said they were investing in
India specifically 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.
    The pact still requires parliamentary approval, and is
expected to become effective in either late 2025 or early 2026.
    Rapid growth in India has fuelled Swiss interest. The IMF
expects the Indian economy to grow 7% this year and 6.5% in
2025, outpacing forecasts of 4.8% and 4.5% for China. The IMF
expects that trend to continue through the end of the decade.
    China has long attracted more Swiss direct investment, but
in 2021-2022 India took the lead, according to data from the
Swiss National Bank.
    "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, who called the trade deal a "game changer".
    According to Reich, around 350 Swiss companies already
operate in India, and more will follow.
    TEPA will reduce tariffs on 94.7% of exports to zero from an
average of 22% 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 return for EFTA-based firms investing $100 billion over
15 years - which aims to create 1 million jobs - India has
promised to provide a favourable investment climate.
    What this means has not been specified in detail beyond the
tariff changes, but both sides have agreed to identify
investment opportunities and help companies deal with problems.
    "The TEPA will benefit everyone," Parmelin told Reuters,
pointing to the reduction of tariffs and administrative burdens.
    
    'RED CARPET'
    Florin Mueller, head of the Swiss Business Hub - part of the
Swiss Trade Promotion Agency in Mumbai - said TEPA would put
India "on the map" for Swiss companies and roll out a "red
carpet for them to come and invest".
    Smaller firms such as Feintool  FTON.S  are setting up
there. The precision component specialist is building its first
Indian factory near the western city of Pune which will employ
up to 200 people when it opens next year.
    The plant, which will make parts for the reclining mechanism
in car seats, will meet demand from Indian and international
customers for a local supplier which makes it easier and quicker
to get the right components.
    "We see huge potential in India," said Feintool's India
managing director Tobias Gries.
    Swiss exports to India are still modest. India bought only
1.5% of total Swiss mechanical and electrical exports in 2023,
though its share grew by nearly 8%.
    Meanwhile, Kuehne+Nagel is increasing its India workforce to
4,800 from 2,850 since 2019, and opening new logistics centres
in Chennai, Gurugram and Kolkata this year.
    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 easing 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 said. "We're very
optimistic."

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India is set to grow faster than China in 2024 and 2025    https://reut.rs/3YcZkdO
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 (Reporting by John Revill
Editing by Dave Graham and Alison Williams)
 ((John.Revill@thomsonreuters.com; +41 41 528 36 37; Reuters
Messaging: john.revill.thomsonreuters.com@reuters.net))