Investments in India by Swiss companies such as engineering group ABB and transport company Kuehne+Nagel are increasing, with a $100 billion regional trade deal expected to further open the country to companies long focused on China.
India’s appeal already reflects a broader shift among companies in Europe eager to balance the costs of the US-China trade war and the recognition that China’s economy, compared to India, is losing steam.
But the Trade and Economic Partnership (TEPA), signed in March with the European Free Trade Association, of which Switzerland is the largest member, is likely, if ratified, to provide an additional boost to Swiss investment by lowering tariffs on the exports from chocolate to watches will decrease. and machinery.
Under the deal, EVA, whose other members are Norway, Iceland and Liechtenstein, will invest $100 billion in India and benefit from easier and cheaper access to the Indian market for 1.4 billion people. India expects the deal to boost exports of pharmaceuticals, clothing and machinery.
“India is really on the rise now,” said Morten Wierod, CEO of ABB, an electrical and industrial automation supplier that is expanding its Indian footprint after its orders there grew by an average of 27% per year over the past three years.
To meet demand, ABB has built factories, offices and showrooms in India. Eight projects have been completed since 2023, increasing the workforce from 6,000 to 10,000 since 2020.
India is now ABB’s fifth-largest market and is on track to become its third-largest market within a few years, after the US and China, Wierod said.
“Our investments in India are supporting that growth, both with more local manufacturing, but with a lot more R&D so that you can make designs in India, for India,” he said.
Although India is growing in importance, ABB is still committed to China, Wierod said, a view shared by other companies Reuters spoke to.
RATES REDUCED
No company Reuters spoke to said they were investing in India specifically because of TEPA, which has yet to come into effect, but the Swiss government and business advocates expect the deal to boost trade and investment.
The pact still requires parliamentary approval and is expected to enter into force in late 2025 or early 2026.
Rapid growth in India has fueled Swiss interest. The IMF expects the Indian economy to grow 7% this year and 6.5% in 2025, beating forecasts of 4.8% and 4.5% for China. The IMF expects this trend to continue until the end of this decade.
China has long attracted more Swiss direct investment, but in 2021-2022 India took the lead, data from the Swiss National Bank shows.
“Doing business in China has become less easy as the economy there is performing less well, and there is also the risk of large-scale conflicts – economic or otherwise – with China,” said Philippe Reich, president of the Swiss-Indian Chamber of Health. Commerce, which called the trade deal a “game changer.”
According to Reich, about 350 Swiss companies are already active in India, with more to follow.
TEPA will cut tariffs on 94.7% of exports to zero from an average of 22% now, giving Swiss companies an edge over their counterparts in the European Union and Britain, which are still negotiating deals with India, it said Minister of Affairs Guy Parmelin.
In return for EFTA-based companies investing $100 billion over 15 years – with the aim of creating 1 million jobs – India has promised to provide a favorable investment environment.
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.
“Everyone will benefit from the TEPA,” Parmelin told Reuters, pointing to the reduction in 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 companies such as Feintool are establishing themselves there. The precision components 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 factory, which will make parts for the tilt mechanism in car seats, will meet the demand of Indian and international customers for a local supplier, making it easier and faster to source the right components.
“We see huge potential in India,” said Tobias Gries, managing director of Feintool in India.
Swiss exports to India are still modest. India bought only 1.5% of total Swiss mechanical and electrical exports in 2023, although its share grew by almost 8%.
Meanwhile, Kuehne+Nagel is increasing its workforce in India to 4,800 from 2,850 since 2019, and is opening new logistics centers in Chennai, Gurugram and Kolkata this year.
India Chief Executive Anish Jha said government programs such as India’s National Logistics Plan, which has brought in major investments in roads, railways and ports, were helping.
The initiative eases transportation costs, stimulates growth and supports Kuehne+Nagel, whose revenues in India are increasing by more than double the total group.
“We are seeing significant growth in India and we are committed to increasing our presence here,” Jha said. “We are very optimistic.”
