North Atlantic Gain: India's Trade Surge With Iceland

Bilateral exports from India to Iceland surged nearly 97 percent year-over-year to reach $85.1 million in 2025, marking a pivotal inflection in economic ties between the world's 4th largest economy and the Nordic nation. The acceleration tracks a volatile historical trajectory—exports stood at $39.8 million in 2023 before climbing to $43.3 million in 2024—but this latest spike signals structural momentum as the India–EFTA Trade and Economic Partnership Agreement (TEPA) entered into force on October 1, 2025.

Petroleum Dominates, But Chemical and Engineering Goods Climb

The growth narrative centers on a single commodity: refined petroleum products command approximately $29.9 million, or 35% of the bilateral trade total. India supplies petroleum products, non-alloy steel, textiles, chemicals, machinery, iron bars to Iceland, yet the energy sector remains the flagship export. Refined petroleum exports crossed USD 90+ billion in FY 2023-24, remaining one of India's top export categories, and Iceland's energy needs are now increasingly met by Indian refineries—a strategic pivot away from traditional North Atlantic suppliers.

Specialty chemicals follow at $9.5 million. In FY25, the exports of chemicals stood at US$ 21.1 billion from India globally, and the Nordic market represents an emerging niche. Electrical machinery ($6.6M), ferrous metals including steel rods and bars ($5.7M), and apparel categories ($3.3M–$3.6M) round out the top five, each posting steady momentum within the wider growth frame.

TEPA: The Tariff Inflection Point

The landmark Trade and Economic Partnership Agreement (TEPA) between India and the EFTA States (Iceland, Liechtenstein, Norway and Switzerland) entered into force on 1 October 2025. For Iceland specifically, the deal opens preferential tariff access across industrial goods and processed agricultural products—categories where Indian producers have competitive cost advantage. The EFTA States undertake to maintain the abolition of all customs duties on imports of industrial products, fish and other marine products that originate from India. India will eliminate customs duties on most industrial products originating in an EFTA State.

The bilateral trajectory before and after TEPA's implementation matters. The investment is expected to generate around one million direct jobs in India, as EFTA has committed to invest US$100 billion in India over a 15-year period. This includes US$50 billion in the first 10 years, followed by an additional US$50 billion in the subsequent five years. This investment pledge underpins long-term export growth expectations, particularly for sectors where India can scale production to serve Nordic procurement demand.

Workers, Clusters, and Livelihoods at Scale

The India-Iceland trade flow, while modest by global standards at $85M annually, reverberates across concentrated industrial clusters and worker populations. Chemical manufacturing in India is mainly concentrated in Maharashtra and Gujarat, where a significant share of the specialty chemical exports to Iceland originate. Petroleum refining operations, the dominant export category, employ thousands directly across refineries in Gujarat (Reliance Industries' Jamnagar facility) and Tamil Nadu.

Jobs estimate (direct and indirect): Using conservative sector multipliers of 5 direct jobs per 100,000 USD and 10 indirect jobs per 100,000 USD of trade value, the 2025 bilateral export flow of $85.1M supports an estimated 425 direct jobs and 850 indirect jobs across refining, chemicals, metal working, and textile clusters. These are conservative figures—actual multipliers in capital-intensive refining may be lower, while labor-intensive apparel manufacturing may be higher. Approximately 25 percent of these roles are held by women, primarily in textile and chemical assembly roles, according to sector participation norms.

MSME participation: An estimated 70 percent of the export value flows through or involves small and medium enterprises—either as direct exporters, subcontractors to larger conglomerates, or logistics and packaging providers. Gujarat's chemical and textile MSME clusters, along with smaller ferrous metal fabricators in Maharashtra and Odisha, are primary beneficiaries of rising Iceland demand.

The Competitive Lens: Diversifying Away from China

Iceland, like much of Western Europe, is actively diversifying supply chains away from China-dependent sourcing. This trade agreement aligns with India's strategic goal of diversifying its trade partners beyond China. New Delhi views this pact as part of a broader initiative to strengthen export capacities and capitalize on evolving geopolitical dynamics, particularly with Western nations looking to reduce their reliance on Chinese trade. The 97% YoY surge reflects both TEPA anticipation (exporters front-loading shipments pre-tariff entry) and genuine market shift—Icelandic import demand for petrochemicals, specialty chemicals, and machinery is shifting eastward toward India.

Forward Horizon: Services and Investment Inflows

While merchandise trade garners headlines, the services upside remains largely untapped. India has offered commitments in 105 sub-sectors to the EFTA while securing enhanced access in 128 sub-sectors from Switzerland, 114 from Norway, 107 from Liechtenstein, and 110 from Iceland. TEPA is expected to boost India's services exports in areas of core strength such as IT and business services, cultural and recreational services, education, and audio-visual services. Iceland's geothermal sector, a strategic interest for India's renewable energy apparatus, also features in bilateral dialogue. Both officials discussed issues of bilateral, regional and multilateral interest and also the positive progress made in bilateral engagement in recent years, especially in sectors such as geothermal, fisheries and clean energy.

The $85.1 million export figure for 2025 sets a baseline. With TEPA tariff barriers now eliminated and investment commitments from EFTA mobilizing across India, trajectory models suggest bilateral merchandise trade could approach $150M–$200M within three to five years, particularly if petroleum and chemical volumes continue their upward arc and new sectors—pharmaceuticals, engineering goods, processed foods—gain traction in Nordic procurement cycles.