Cabinet Clears Revised Financial Services Offer To Wto

The Union cabinet on Tuesday cleared the revised Indian offer on financial services for submission to the World Trade Organisation, which entails only a marginal improvement on the earlier offer and retains a status quo on insurance.

Senior government sources anticipate that all the member countries would meet the December 12 deadline to submit their offers (the formal negotiations will begin only thereafter). They also believe that there was a chance, as in the past, of the negotiations being held up by the United States on the ground of no quality offers.

The last round of negotiations had broken down in 1995 after the US pulled out of the talks claiming that the South-east Asian countries and Japan had made inadequate offers. Thereafter, the remaining member countries had thrashed out an interim agreement with the promise to make revised offers on December 12.

The Indian offer is significant in light of the stiff resistance, to further liberalisation in trade in financial services, put up by the South-east Asian countries in wake of the currency crisis. Senior officials, noted that on this occasion, India has not adopted its traditionally strident stand on trade negotiations vis-a-vis the developed countries. Assisting the Indian delegation in the negotiations in Geneva is Santosh Kumar, joint secretary, in the finance ministry.

The main improvements in the Indian offer pertain to areas of non-bank finance companies and banking. Sources aver that India may also make concessions to the developed nations demand that it will allow foreign equity participation in broking services capped at 49 per cent at present to be increased to 51 per cent. This increase in foreign holding may also be extended to leasing and factoring services too.

India is also open to discussions on progressive removal of limitations on opening new bank branches in the country. Senior officials point out that as many as 42 foreign banks have operations in India. In fact, in the last one year, the Reserve Bank of India has permitted entry of more than the mandatory eight foreign banks per year, sources added.

Indias offer also states that further liberalisation of trade in insurance services would be linked to the passage of the Insurance Regulatory Authority of India bill. The initial effort by the United Front government to get the bill passed in the Lok Sabha had come apart in the face of its ability to muster sufficient support. Thereafter, the fall of the government has stalled any further parliamentary progress with regards to the bill.