India could seal a free trade agreement with the 28-nation European Union soon, Prime Minister Manmohan Singh said Friday, despite the differences harboured by both sides on crucial issues.
"I hope industry is thinking seriously of how to become more competitive. It is because we are confident that it can that we have entered into Comprehensive Economic Partnership Agreement with the ASEAN countries as well as the Republic of Korea. We are hoping to conclude a similar agreement with the European Union soon," said the prime minister, addressing captains of industry at the Assocham annual general meeting here.
Launched in 2007, negotiations for the proposed India-EU Broadbased Trade and Investment Agreement (BTIA) have been hobbled by serious differences on issues like higher FDI cap, taxes and market access. Consequently, a scheduled meeting between Commerce and Industry minister Anand Sharma and EU Trade Commissioner Karel de Gucht, which was to take place in June to close the talks, has not yet taken place.
The EU wants India to open up its banking and insurance sectors and raise the FDI cap to 49 per cent in insurance. India has said it is unable to do so without an approval from Parliament. It is also demanding significant duty cuts in automobiles, tax reduction in wines and spirits, and dairy products and a strong intellectual property regime (IPR).
India, on the other hand, is asking the EU to accord the data secure nation status to it. Such a allowance is necessary for Indian IT companies seeking greater business opportunities.
India is among nations not considered data secure by the EU. The EU law mandates that European countries doing outsourcing business with countries that are not certified as data secure have to follow stringent contractual obligations which increases operating costs and affects competitiveness.
India is also wants liberalised visa norms for its professionals and market access in services and pharmaceuticals sector.
Once concluded, the proposed trade deal would cover more than 95 percent of tariff lines and encompass a market of over 1.7 billion people.
The upcoming monsoon session of the Parliament may hold the key to the trade deal. It is expected that during this session Parliament might take up the Insurance Laws (Amendment) Bill 2008 that seeks to raise foreign direct investment (FDI) cap from 26 to 49 percent.
Said the prime minister: "We need to push our exports... Looking ahead, the rupee depreciation will help Indian industry to compete effectively with other countries, both in export markets and against their imports in our markets."