India will sign a Comprehensive Economic Partnership Agreement (Cepa) with Japan tomorrow, setting the stage for free bilateral trade of goods and services.

The pact will be India’s third major market-opening pact within a year and will be initialled by Indian Commerce and Industry Minister Mr Anand Sharma and Japanese Foreign Affairs Minister Mr Seiji Maehara, in Tokyo.

“It is expected that this agreement will promote the liberalisation and facilitation of trade and investment between the two countries and will further vitalise both economies by strengthening reciprocal economic ties in wide-ranging fields,” a statement by Japanese Ministry of Economy, Trade and Industry said.

As per the pact, both countries would reduce customs duty on merchandise trade from April, and will eventually eliminate it in the coming 10 years.

Around 90 per cent of the $12 billion trade would be covered under the Free Trade Agreement (FTA). In services, restrictions on movement of professionals such as chefs, accountants, English teachers, doctors and nurses would be eased.

Pharmaceuticals, one of the ticklish areas in the FTA negotiations, has been resolved with Japan agreeing to provide market access to Indian pharma companies in the highly- regulated market. India has been demanding that the drugs approved by the US Food and Drugs Administration (FDA) should be allowed in the Japanese market. However, the Japan had been insisting that pharmaceuticals imports must comply with the Japanese standards.

Certain sectors like automobile and agri products have been kept out of the pact by India, to protect its domestic manufacturers and farmers from the impact of cheap imports.

India earlier has entered into FTA with Association of Southeast Nations (ASEAN) and South Korea. India’s trade only in merchandise goods, with ASEAN, Japan and South Korea is about $85 billion - 16 per cent of the country’s total global commerce.