The India-EU free trade negotiations have been unofficially put on hold till the Government announces its Budget for 2013-14 next month-end.
The EU is keenly watching out for budgetary concessions, in areas such as insurance and import duties on goods, that could be woven into the bilateral agreement, an Indian official has said.
“Since we have reached the last round of our negotiations, it seems that the EU wants to wait and see what our Budget offers so that it could incorporate it in the free trade agreement. Once a commitment is made in a pact, it is difficult to go back on it,” a Commerce Department official told
Interestingly, Finance Minister P. Chidambaram, who is on a global tour to woo foreign investments, told investors in Singapore on Tuesday that the Budget would hold a lot for them.
Negotiations on the India-EU pact, formally known as the broad-based trade and investment agreement (BTIA), are on since 2007. Most of the issues related to tariff concessions in industrial and farm goods are more or less settled and both sides have expressed keenness to settle thorny issues such as professional visas, intellectual property, foreign investment in retail and insurance and data security without delay.
While a meeting on some technical issues related to the proposed pact is expected later this month, formal negotiations are not scheduled either this month or the next, the official said.
There are expectations that the Insurance Bill proposing to increase foreign investment limit in the insurance sector to 49 per cent from the existing limit of 26 per cent will be taken up during the Budget session.
There are also demands from the industry for import duty cuts on a number of capital goods and industrial inputs.
Moreover, the EU wants to see if there would be any movement in the Public Procurement Bill introduced by the Finance Ministry in Lok Sabha last year during the Budget session. The legislation seeks to make the process of public procurement transparent and free of corruption.
“The EU is keen to include both insurance and Government procurement in the FTA and take commitments that India cannot back-track on. It has its fingers crossed over whether something would happen during Budget time in these areas,” the official said.
New Delhi is yet to make up its mind whether it wants to take on binding commitments for foreign direct investment in retail. Although India has allowed 51 per cent FDI in multi-brand retail and 100 per cent FDI in single-brand retail subject to certain conditions, policy makers are not sure whether they should bind these commitments as it would be difficult to change them if they feel the need at a later time.
“There is no guarantee that even if the FDI limit for insurance is raised or some duties are reduced, the EU will be able to cut a better deal for itself in the FTA. But it would certainly have reasons to bargain more effectively,” a trade expert working for an industry chamber said.
The BTIA is expected to create additional markets that would almost double bilateral trade to an estimated €150 billion ($200 billion) from about $110 billion last year.
amiti.sen@thehindu.co.in