From $39.8 million in 2023 to $82.6 million in fiscal 2025, bilateral merchandise trade between India and Iceland has effectively doubled in two years—a trajectory reshaping both export opportunity and industrial momentum across the Indian economy.

The expansion accelerated sharply in the most recent fiscal period. Indian exports to Iceland reached $66.01 million in 2024-25, with imports standing at $11.05 million according to India's Ministry of External Affairs. That represents 90.3% year-on-year growth from the prior 12 months—a pace that outpaces broader India-EFTA trajectories and signals both emerging demand and TEPA's catalytic effect on bilateral shipments.

The growth story pivots on three primary sectors. Mineral fuels—chiefly refined petroleum products and aviation turbine fuel—dominate the export basket at $29.9 million in fiscal 2025. India ranks as a leading aviation turbine fuel exporter, with ATF exports accounting for $5.33 billion globally in 2024-25, and Iceland represents a natural Nordic outlet for these products. Specialty chemicals follow at $9.5 million, with organic compounds and pharmaceutical intermediates forming the backbone of this segment. Electrical machinery and equipment round out the top tier at $6.6 million, reflecting Indian manufacturers' competitive positioning in control systems and power electronics for Iceland's renewable energy infrastructure.

When Tariff Frameworks Meet Market Access

The Trade and Economic Partnership Agreement between India and the EFTA states entered into force on 1 October 2025, after 16 years of intermittent negotiation. This timing matters directly to the growth data above. The bilateral expansion from fiscal 2024 to 2025—culminating in $82.6 million—reflects exporters' forward positioning ahead of TEPA's implementation and the tariff certainty that followed.

Under TEPA, EFTA has agreed to cut its tariffs on 92.2% of its tariff lines, comprising 99.6% of Indian exports. For India's mineral fuel sector, this means zero-duty access to Iceland's refining clusters and power infrastructure. Textiles and apparel exports—currently modest at under $300,000 annually—now enjoy immediate duty elimination, opening pathways for Indian garment makers to access Iceland's design-conscious retail market.

Iceland is one of four EFTA states that jointly committed to invest USD 100 billion in India over the next fifteen years under the agreement. That investment commitment structures long-term partnerships in renewable energy—a sector where Iceland's geothermal expertise and India's solar and hydrogen ambitions align directly. India's Ministry of New and Renewable Energy released the country's first National Geothermal Energy Policy in September 2025, naming Iceland directly as a development partner.

Industrial Clusters and Livelihoods Across India

This trade flow anchors employment across India's refining, petrochemicals, and specialty chemicals clusters. The data payload indicates these sectors operate with multiplier effects: for every 100,000 USD in direct export value, 5 direct jobs are supported in manufacturing and trade administration, with 10 indirect jobs created across supply chains, warehousing, and logistics networks.

Applied to the $66 million in Indian exports to Iceland in 2024-25, this implies approximately 33 direct jobs and 66 indirect jobs supported within India's petroleum refining, chemicals, and electrical machinery sectors. These are concentrated in refineries and petrochemical complexes across Gujarat (home to major refining clusters in the Vadodara and Surat regions), Maharashtra (Mumbai-based petrochemical manufacturers), and Tamil Nadu (Chennai's petroleum and specialty chemicals hubs).

The broader export ecosystem—MSMEs in particular—captures substantial participation. An estimated 70% of export-related businesses are classified as small or medium enterprises, ranging from chemical intermediates producers to electrical components fabricators and logistics coordinators. Women comprise approximately 25% of the direct workforce in these segments, concentrated in quality control, laboratory testing, and administrative roles within export-focused manufacturing units.

The textile and apparel opportunity—currently nascent at under $0.3 million—represents the next frontier for Indian MSMEs. Iceland's fashion market now benefits from the India-EFTA Trade and Economic Partnership Agreement, which entered into force on 1 October 2025 and eliminates duty on the vast majority of industrial products, including apparel and textiles. India's garment clusters in Tamil Nadu, Telangana, and Gujarat are positioned to capture this demand as TEPA tariff preferences gain awareness among Icelandic retailers.

What the Next Cycle Holds

The four-year trajectory—from $152 million in calendar 2022 (which included one-time bulk shipments), through the 2023 correction, to the sustained acceleration now underway—suggests bilateral commerce has found its natural sustainable level somewhere in the $75-85 million annual range, with upside potential as TEPA-eligible sectors mature.

Indian officials project that TEPA will boost India's exports of products such as pharmaceuticals, textiles, chemicals, and machinery to the EFTA region. For Iceland specifically, the pharmaceutical and specialty chemical segments warrant attention. Based on trade patterns and FTA tariff concessions, high-opportunity sectors for India include processed food products such as biscuits, confectionery, and chocolate, as well as rice, where tariff elimination enhances competitiveness. Agricultural exports—fresh mangoes, spices, basmati rice—are emerging as APEDA-coordinated opportunities.

The bilateral relationship remains modest by global standards, but the growth trajectory, TEPA's tariff certainty, and renewed focus on renewable energy cooperation point toward deeper integration. For Indian workers and communities in refining hubs, chemical clusters, and garment centres, this partnership now represents tangible export demand that sustains factory floors and livelihoods across four key industrial states.