As Centre fails to get through the legislation on hiking FDI in insurance

Negotiations in the crucial round talks between India and the European Union (EU) for the free trade agreement (FTA) set to take place on May 15 here are likely to hit a roadblock in view of India’s failure to get through the legislation on hiking foreign direct investment (FDI) limit in the insurance sector to 49 per cent, a major demand by EU member countries, especially Germany.

The government, on Wednesday, informed Parliament that final positions of India and EU were yet to emerge as the negotiations on various contentious issues, including duty cuts in the automobile sector, were still on. “Final positions are to emerge as the negotiations across various sectors, including cars, are ongoing,” Minister of State for Commerce and Industry D. Purandeswari said.

Of late, Germany, along with some other member EU countries, has been very vocal in its demand for opening up of the insurance and automobile sectors for EU companies. The Indian Government had assured the EU leaders that India was actively working on opening up of the insurance sector and legislation was now pending before Parliament for hiking the FDI limit to 49 per cent from 26 per cent. In fact, Germany’s Ambassador to India Michael Steiner, before Dr. Singh’s visit to Berlin last month, has pitched strongly for opening up of the automobile sector for EU companies and hiking the FDI limit in the insurance sector.

German Chancellor Angela Merkel had also raked up the topic with Dr. Singh, and strongly pushed for an increase in FDI cap in the insurance sector and termed it as an ‘undeniably’ important issue.

However, the failure of the government to get through the insurance legislation in Parliament is likely to cast a shadow over the May 15 round of negotiations. “The inability of the government to get through the Bill on hike in insurance sector is likely to impact the progress of talks. We don’t expect anything dramatic to happen in view of the latest developments,” a senior official in Commerce and Industry associated with the negotiations said.

On the other hand, Dr. Purandeswari said India was seeking a good package on services, including cross-border flow of IT and ITeS, movement of Indian professionals and grant of data secure status. Negotiations across a number of tracks, including trade in goods and services, investment, sanitary and phytosanitary measures (dealing with basic rules for food safety and animal and plant health standards), technical barriers to trade, trade remedies, government procurement, customs cooperation and trade facilitation, dispute settlement, competition and intellectual property rights are underway. So far, 15 rounds of negotiations have been held since the launch of the talks.

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