Insurance FDI cap key to India-EU trade pact

Issue to figure prominently during Prime Minister Manmohan Singh's visit to Berlin next week

A hike in foreign direct investment (FDI) in India’s insurance sector, currently 26 per cent, to 49 per cent is critical to close the much-awaited India-European Union (EU) trade pact, according to people in the know of the ongoing negotiations.

The EU has made it clear to India that it will not continue the talks if India fails to provide a commitment on increasing the FDI cap in the sector.

The issue was strongly raised by the EU during the chief negotiators’ meeting in Brussels last month. It is going to again pitch for it during the ministerial meeting,  scheduled to take place in Brussels on April 15.

The matter is also going to come up prominently during Prime Minister Manmohan Singh’s visit to Berlin on April 10, where he will be holding an inter-governmental consultation with Chancellor Angela Merkel.

“The consultations will focus on partnership in infrastructure, renewable energy, vocational training. Both, India and Germany are in favour of the timely conclusion of the India-EU free trade agreement (FTA),” Germany's Ambassador to India Michael Steiner said today. As India’s biggest trading partner in the EU, Germany has a considerable say in the ongoing FTA talks.

External Affairs Minister Salman Khurshid, Commerce Minister Anand Sharma, HRD Minister M M Pallam Raju, Science & Technology Minister Jaipal Reddy and National Security Advisor Shivshankar Menon are likely to join the prime minister for the second India-Germany joint cabinet level meeting in Berlin. The first such meeting was held in New Delhi in May 2011.

Last year in October, the Cabinet had approved amendments to the Insurance Laws (Amendment), Bill, 2008. It has not been tabled in Parliament yet.

According to people in the know, issues concerning a reduction in tariffs on imports of automobile and wines and spirits have more or less been sorted. Earlier, EU Ambassador to India Joao Cravinho had warned if the negotiations, which have missed several deadlines, were not concluded by 2013, then the deal might not get the same attention from Brussels, as it will shift its focus to having a much broader and ambitious deal with the US. Negotiations on the India-EU deal have been on since 2007 and missed several deadlines.

India, on the other hand, has been insistent that EU grants it the status of ‘Data Secure’ nation without which, it will not be able to gain meaningful market access for the information technology industry.

Besides, Germany is also keen to participate in some way in the Delhi-Mumbai Industrial Corridor. It is especially focused on the Chennai – Bangalore industrial clusters, which could act as a gateway for several German firms. The German government is also eager to participate on a ‘Green Energy Corridor’ in collaboration with the Indian government, and is learnt to have plans for a ^1-billion credit line for the same.