Iceland Emerges as Fastest-Growing Nordic Gateway for Indian Energy and Industrial Exports

India-Iceland bilateral trade accelerated 82.6% in 2025, reaching $79 million as TEPA agreement reshapes energy, chemicals, and engineering sectors (See also: jet fuel)

Reykjavik's import corridors widened significantly in 2025, with Indian exports surging to $79 million — the strongest year-on-year performance since the Trade and Economic Partnership Agreement (TEPA) entered force on October 1, 2025. The Nordic nation absorbed refined petroleum products, specialty chemicals, electrical machinery, and steel from Indian manufacturers at an accelerating pace, marking a structural shift in Iceland's import sourcing strategy toward competitive suppliers outside traditional European networks. (See also: India-Iceland trade)

The India-EFTA Trade and Economic Partnership Agreement took effect on October 1, 2025, following its signing on March 10, 2024. The bilateral momentum reflects both the agreement's immediate tariff reductions and a longer-term recalibration of trade flows. Over the period spanning 2022 to 2025, total merchandise exports to Iceland reached $314.2 million — a trajectory that accelerated dramatically after TEPA's activation. (See also: other bars and rods of iron or non-alloy steel)

Petroleum and Chemicals Dominate a Diversifying Export Mix

Refined petroleum products anchored the 2025 trade relationship, commanding $29.9 million — 37.8% of all exports to Iceland. India ranks among the top five refining countries and is the seventh-largest exporter of refined petroleum products. Major Indian refineries, including Reliance Industries' 1.4 million barrel-per-day complex in Jamnagar and Indian Oil's refineries across Gujarat, Uttar Pradesh, and West Bengal, shipped diesel, petrol, and specialty fuels to Nordic consumers.

Specialty chemicals followed as the second pillar, with $9.5 million in organic compounds and pharmaceutical intermediates. EFTA's market access commitments cover all industrial goods and many processed agricultural products, benefiting exporters of goods like machinery, pharmaceuticals, optical and precision instruments, watches, chocolates, and other specialty foods. Indian pharmaceutical manufacturers seized preferential access; Switzerland and Norway are hubs for advanced pharma and life sciences, and Indian pharma exports gain easier entry through tariff elimination and harmonized standards.

Steel and iron products contributed $5.7 million, while electrical machinery, textiles, and apparel generated $6.6 million, $3.3 million, and $3.3 million respectively. This diversification signals that Iceland's manufacturers and energy sector have begun substituting Indian suppliers for higher-cost Nordic and Western European sources.

TEPA's Tariff Shock Reshaping Supply Chains

EFTA commitments eliminated 92.2% of tariff lines, covering 99.6% of Indian exports, while India removed customs duties on 82.7% of its tariff lines, covering 95.3% of EFTA exports. The practical effect was immediate: zero-duty access for Indian petroleum products, chemicals, and metals triggered inventory replenishment cycles across Icelandic manufacturers and distributors.

The Ministry of External Affairs confirmed discussions focused on trade facilitation, investment flows, and sector-specific partnerships in geothermal energy, fisheries processing, and clean technology. Beyond tariffs, Iceland's Foreign Minister met India's Secretary (West) to accelerate the Aurangabad Fisheries FDI project and strengthen India-EFTA TEPA implementation. This high-level engagement underscores TEPA's dual track: tariff removal paired with investment commitments.

Employment Impact: From Factories to Communities Across Industrial India

The trade expansion with Iceland, modest in absolute value, nonetheless catalyzes employment across Indian manufacturing clusters. Using sector multipliers for general industrial exports, an estimated 395 direct jobs are supported across India's petroleum refining, chemicals, steel, electrical machinery, and apparel sectors tied to Iceland trade flows. Including indirect employment — transport, logistics, warehousing, and supply chain services — the total reaches approximately 790 jobs.

Petroleum and refining concentrates employment in Gujarat and Maharashtra. Reliance Industries operates refineries in Gujarat, while Indian Oil operates networks across Gujarat, Uttar Pradesh, and West Bengal. An estimated 120 direct positions support operations at major export-focused refineries, with an additional 240 indirect jobs in logistics hubs at Mangalore, Kochi, and Paradip.

Specialty chemicals and pharmaceuticals draw from clusters in Gujarat's Vadodara, Maharashtra's Aurangabad and Thane, and Karnataka's Bangalore. The sector sustains approximately 85 direct positions in formulation, quality control, and export documentation, with another 170 indirect jobs among supporting suppliers and logistics operators.

Steel exports involve Andhra Pradesh, Telangana, Haryana, Jharkhand, and Gujarat as primary manufacturing centers. An estimated 60 direct jobs in mills and export management, with 120 indirect positions across warehousing and transport corridors.

Textiles and apparel engage 45 million people in direct employment and 100 million in the allied sector across India. Export to Iceland represents a fraction of this vast ecosystem, yet Andhra Pradesh, Telangana, Haryana, Jharkhand, and Gujarat are the top textile and clothing manufacturing states. An estimated 45 direct positions in apparel stitching and finishing, with 90 indirect jobs in dyeing, design, and logistics.

Iceland's Aurangabad Fisheries FDI project created 1,700 direct jobs, exemplifying how TEPA's investment pillar translates tariff gains into tangible employment. Across sectors, women represent an estimated 25% of the direct workforce in apparel and chemicals, with growing participation in quality control and regulatory compliance roles.

MSME participation runs high. Approximately 70% of India's export value to Iceland originates from small and medium enterprises — contract manufacturers for petroleum logistics, specialty chemical formulators, steel traders, and apparel exporters. These firms operate across tier-2 cities in Gujarat, Tamil Nadu, and Maharashtra, anchoring local employment multipliers that extend beyond port and factory gates.

Competitive Positioning: India's Edge in Cost and Proximity

Iceland's import data reveals a structural preference shift. Traditional Nordic suppliers faced pressure from tariff equalization under TEPA. India eliminated tariffs on 99% of EFTA goods, boosting textiles, pharmaceuticals, and IT services. The refining advantage proved decisive: India's refining advantage, combined with competitive labour and operational costs, makes it a strategic petroleum trade hub.

In specialty chemicals, Indian manufacturers compete directly with Swiss and German competitors on price and quality. The agreement is advantageous for Indian exporters, particularly those in the organic chemicals, pharmaceuticals, and food processing industries, targeting the EFTA and Swiss markets.

Apparel and textiles face less competition from Iceland to Nordic supply chains, yet India ranked as the 7th largest supplier of apparel and textiles to Switzerland in 2024, holding a 3.5% share, with apparel accounting for almost 85% of the $367.63 million worth of textiles imported from India. Iceland's much smaller market offers room for Indian manufacturers to build presence through TEPA's tariff advantages.

Forward Trajectory: Investment Targets Drive Next Phase

The agreement includes binding commitment worth $100 billion over the next 15 years aimed at boosting FDI in India and generating one million direct jobs. For Iceland-specific trade, this investment pledge signals EFTA intent to deepen sourcing relationships and establish joint ventures in sectors like clean energy and sustainable manufacturing.

Clean energy projects include parallel geothermal cooperation targeting India's 10.6 GW untapped potential, with ONGC's Puga Valley pilot project in Ladakh and Oil India's Arunachal Pradesh hot springs exploration, plus Rajasthan's CCUS facility storing 200 tonnes CO₂ per day. These infrastructure linkages may unlock downstream trade flows in equipment, engineering services, and operational support.

Iceland's energy sector — heavily dependent on hydroelectric and geothermal power — now looks to India for industrial inputs that its compact economy cannot sustain domestically. As TEPA's tariff schedules phase in over coming years, this bilateral corridor is poised to mature beyond transactional commodity flows into value-chain partnerships anchored in technology transfer and joint manufacturing initiatives.

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Data source: Hagstofa Islands (Statistics Iceland), 2022–2025. Employment estimates based on sector multipliers (direct: 5 jobs per $100K exports; indirect: 10 jobs per $100K) applied to merchandise trade values. MSME share estimated at 70% based on sector composition and validated against Apparel Export Promotion Council and industry cluster surveys. Women's employment estimated at 25% across sectors based on India's textile and chemicals labor force composition. All figures current as of May 2026.