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The European Union wants India to raise foreign direct investment (FDI) limit in the insurance sector and also increase voting rights of foreign investors as part of the proposed bilateral Free Trade Agreement (FTA).
A group of Parliamentarians from the European Union, who play a critical role in ratifying trade agreements signed by the European Commission, met their Indian counterparts on Tuesday and urged them to sign a number of pending Bills including the Insurance Bill and the Pension Bill.
“The logic of the negotiations is that unless everything is agreed, nothing is agreed. Insurance is not agreed yet,” Pawel Zalewski, Vice Chair, INTA (International Trade) Committee, European Parliament said addressing a group of journalists.
The EU has its eyes fixed on the Insurance Bill yet to be passed by India’s Parliament. “We will not be merely satisfied by a raise in FDI cap if there is no increase in voting rights,” a EU trade official said.
The Insurance Bill in its current form seeks to raise FDI cap from 26 per cent to 49 per cent.
The visiting Parliamentarians, however, are not optimistic of the proposed FTA, formally known as the India-EU Broad-based Trade & Investment Agreement, to be concluded before the country’s Lok Sabha elections next year.
“The idea that we have got after talking to our Indian colleagues is that it will be difficult to get any progress in the India-EU FTA before the elections,” Zalewski said. We urged them to pass the pending Bills in Parliament so that the negotiations are facilitated, he added.
The negotiation, launched in 2007, seeks to open up markets in both goods and services, in addition to easing investment and government procurement rules. The EU is India’s largest trade and investment partner.
The pact will be beneficial for India as it will also create an estimated two million new jobs, according to a EU study.
While insurance and banking remain key areas for the EU, the 27-member union has decided to forego its demand for changes in India’s patent regime.
“We are aware of India’s concerns about availability of cheap generics for its and are not pressing for changes in its patent regime,” Zalewski said.
The EU, however, is not willing to include India’s demand for grant of Data Secure status, in the agreement. Gaining Data Secure status within the EU will encourage companies in the bloc to out-source sophisticated on-line business to India.
“We have set up a working group on it to help India earn the status, but it can’t be part of the FTA,” an EU official said.
India has been insisting on grant of Data Secure status simultaneously with the signing of the FTA.
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