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Parliament holds the key to unlock India - EU FTA talks

During this session, the Parliament also might take up Insurance Laws (Amendment) Bill 2008 that seeks to raise FDI from 26% to 49%

Nayanima Basu  |  New Delhi 

The upcoming monsoon session of the seems to be holding the key to finally have the trade deal signed between and the 28-nation bloc European Union (EU). This is because of widespread expectation that during this session the might take up the (Amendment) Bill 2008 that seeks to raise foreign direct investment (FDI) cap from 26% to 49%.

Allowing more in the insurance sector has been one of the foremost demands of EU under the free trade talks that started in 2007 as it wants to open up its banking and insurance sector. But India, on the other hand, had been skeptic about this due to the ongoing financial recession there and the large-scale regulatory issues that plague EU's banking system.

This is also the main reason why the scheduled meeting between commerce and industry minister Anand Sharma and EU Trade Commissioner Karel de Gucht, which was supposed to take place in June to close the talks have not yet happened, a senior commerce department official told Business Standard. The ministers last met in April and it was decided that they will next meet in June.

Dates for the monsoon session has not been announced by the government yet.

Interestingly, the official said, even if the gives it nod to increase the limit to 49% “it does not mean that it gets automatically committed to the EU. We will take a view at that time whether we will commit whole of it or partially.”

For example, if a certain European company wants to invest in India’s insurance sector within the 49% cap, the government will protect only that much amount under the agreement on which the deal will be agreed upon.

“After Parliament accepts 49%, it will be on commerce (department) to decide whether we would like to commit whole of it. We have to now find a balance. We will not give them what they want if we are not able to get what we want,” the official added.

Germany is one of the main countries in EU that is demanding liberalization of the banking and insurance sector. The issue was strongly put forward by Chancellor Angela Merkel during Prime Minister Manmohan Singh’s visit to Berlin in April.

It is learnt that recently commerce secretary SR Rao visited Brussels where discussions concerning the main problems areas of the FTA talks were discussed. In May the meeting between chief negotiators from both sides also remained inconclusive.

The decision to allow 49% in the insurance sector was approved by the Cabinet in October last year. However, this can be implemented only when Parliament gives the green signal.

Once concluded the proposed trade deal would cover more than 95 percent of tariff lines and encompass a market of over 1.7 billion people.

First Published: Tue, July 09 2013. 19:10 IST