Prime Minister Narendra Modi will travel to Brussels for the EU-India summit on March 30, which is being held after a long gap of four years that have also seen the suspension of talks on the Bilateral Trade and Investment Agreement (BTIA), sources confirmed to The Hindu .
Officials say they hope that the visit by Mr. Modi, who will stop in Brussels on his way to the U.S. will also see an announcement on the resumption of talks on the BTIA, as the free trade agreement (FTA) is known.
On Monday Commerce Secretary Rita Teotia will lead a delegation to Brussels to meet her counterpart at the European Commission. Sources also say that there will be one more meeting on the FTA on March 30 at the level of Commerce Ministers on the sidelines of the PM’s visit.
According to officials there are still some obstacles preventing the resumption of the India-EU FTA talks that were suspended in 2013 after 16 rounds of negotiation.
To begin with, the EU is learnt to have asked India to substantially bring down the “high” duties on automobiles as a pre-condition for resumption of the FTA negotiations. India’s import duty on cars range from 60-120 per cent as against the EU’s 10 per cent.
The industry body for automobiles - Society of Indian Automobile Manufacturers (SIAM) - had recently asked the Commerce Ministry not to “buckle under pressure” from the EU, adding that this could ultimately hurt the government’s 'Make In India' initiative.
The sources said if the EU persists with its demand on the auto sector and culls that out of the overall give-and-take involved in the FTA negotiations, India too would raise concerns regarding restrictions on temporary movement of skilled professionals to the EU, especially the recent move by UK to hike visa fees for skilled professionals as well as increase minimum salary threshold for intra-company transfers.
While EU has been demanding that India lower its duties on automobiles and wines and spirits, India has been seeking data security status (crucial for India's IT sector to do more business with the EU firms), and easier visas for skilled professionals.
Officials point out that since 2013, India has unilaterally undertaken several reforms such as allowing 49 per cent foreign investment in insurance and pension, easing of foreign investments norms in banking, defence and railways sectors. It has also allowed 100 per cent FDI in telecom and single-brand retail, and even 51 per cent in multi-brand retail (though the BJP-led government is discouraging foreign investment in this sector).
These reforms would be cited during the stock-taking meeting and the EU would be asked about their internal reforms that would similarly benefit India, the sources said.
In August 2015, India had deferred FTA talks saying it was “disappointed and concerned” over the EU imposing a ban on sale of around 700 pharma products clinically tested by GVK Biosciences. Both sides have since then held talks to separately resolve the GVK issue.
Meanwhile, tensions over the pending murder case against Italian marines, which Italy has now taken to the International (Permanent) court of Arbitrage in the Hague has also played a spoiler in the EU-India relationship.
Officials say despite all the hiccups in holding the EU-India summit and restarting the FTA negotiations, the EU remains a “critical” trading partner. “Remember, The European Union is our largest trading partner, and our largest export destination. And it is our largest source of Foreign Direct Investment,” India’s Ambassador to the European Union Manjeev Puri told The Hindu .
However, India's exports to EU in 2014-15 had shrunk (-)4.4 per cent year on year to $49.3 billion. Imports from EU had also contracted (-)1.5 per cent in 2014-15 to $49.2 billion.
Officials hope that with PM Modi’s visit, that was put off at least twice last year will prove third time lucky in putting the relationship back on track.