Prime Minister Narendra Modi said in Germany that for mutual and balanced benefit, India and European Union (EU) should resume talks of the Free Trade agreement at the earliest.
When Prime Minister Narendra Modi visited Germany earlier this year, he had said that for mutual and balanced benefit, India and European Union (EU) should resume talks about the Free Trade Agreement (FTA) at the earliest.
The FTA was launched in 2007 to increase the trade flows between India and the 28-member EU. The agreement proposed to enhance bilateral trade, which had resulted in a significant increase in trade between the two, before it was stalled in 2013.
Talks about the FTA between India and EU are likely to resume in August.
India is an important trade partner for the EU, and an emerging global economic power, with a massive population of over one billion people.
Trade flow during the tenure of FTA 1.0
-- In 2014, the value of EU-India trade was at 72.5 billion euro, up from 28.6 billion in 2003.
-- EU's investment stock in India was 34.7 billion euro in 2013.
-- Since the FTA was introduced, trade in commercial services increased four times in the past decade -- from 5.2 billion euro in 2002 to 23.7 billion euro in 2013.
-- During the seven year tenure, while in value terms the trade between India and European Union grew consistently, the ratio of import and export changed from EU initially importing less and exporting more, to the 28 member unit ending 2014 with importing more from India than it exported.
According to a report released by European Commission, some progress has been made to dissolve trade barriers between India and EU.
Here are some of the main points according to the 'Trade and Investments Barriers Report':
| India suspended the implementation of some aspects the preferential procurement policies for domestically manufactured electronic goods and telecom products due to security considerations that would have been be applied in a mandatory manner for both public and most importantly private purchasing entities (e.g. telecom services operators). The revised preference policy only addresses public procurement. |
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India introduced some changes in investment rules and opened the possibility for 100% foreign ownership in the telecoms sector.
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In addition, more recently the Government expressed the intention of raising FDI limits in defence manufacturing from the current 26% to 49%, and a similar increase of FDI limit of 26% to 49% in the field of insurance companies was adopted by the Parliament.
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After easing concerns about investment climate and trade policies, here's what the EU-India trade negotiations that are likely to start in August will cover:
-- access to each other's markets, for goods, services and to public procurement contracts,
-- the framework for investment
-- the rules that frame trade, such as intellectual property and competition
-- sustainable development, growth in trade is in tandem with the environment, social and labour rights.
Joao Cravinho, EU Ambassador, in an interview with Hindu Businessline on April 29 had said that: "We are the biggest trade partner for India, we are the biggest source of investment for India and the biggest source of technology. And so, in those circumstances for Make in India to be successful, you have to have European companies making in India. We have a lot of interest from the European side. But there are issues to be solved."
One of the main reasons for the stalling of the FTA was the difficulty of doing business or the trade in India, and environment regulation. The Indian government is also working toward passing the Land Acquisition Bill, which is already tabled in the ongoing Monsoon session in the Parliament, which certainly have an impact on the ease of doing business in India
India still maintains substantial tariff and non-tariff barriers that hampers trade with the EU. India also imposes a number of non-tariff barriers in the form of quantitative restrictions, import licensing, and mandatory testing,. Others are complicated and lengthy customs procedures, and and certification for some products. Non-tariff barriers include quotas, levies, sanctions and other restrictions.
Apart from trade, Cravinho, in the interview had said that apart from Make in India, EU was also interested in other flagship programmes like Clean Ganga mission, smart cities and digital India. "All these programmes have tremendous potential for cooperation between India and EU," he said.
The 28-member Union had demanded tariff cuts in products such as wines, spirits and automobile, besides inclusion of labour-related aspects. It also wanted liberalization in retail and legal services.
On the other hand, India is insisting on data-secure nation status and immigration quota from the EU. The status is crucial as it will have a bearing on Indian IT companies keen to gain market access in the 28-member union.
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