Narendra Modi-led BJP govt looks to address European Union concerns over market access

Narendra Modi govt is favourably inclined to address key concerns of EU over restricted access to Indian mkts.

New Delhi | Published: June 7, 2014 12:08:01 pm
The Mayor had earlier sought time from Modi for the meeting that lasted around  45 minutes. The Mayor had earlier sought time from Modi for the meeting that lasted around 45 minutes.

The Narendra Modi government is favourably inclined to address key concerns of the European Union over the restricted access to Indian markets. A bilateral meeting between on June 26 will discuss EU demands, including raising the foreign investment cap in insurance, sources told FE.

Brussels is also pressing for changes in India’s public procurement policy to accommodate European firms, besides a non-adversarial tax regime in India, with the dilution/removal of the recent retrospective changes in the country’s tax laws.

Among the main objectives of the meeting of the apex forum for India-EU trade, economic and development issues – called the India-European Commission Joint Commission – is re-starting the bilateral trade and investment agreement and expediting its conclusion, official sources added.

They said New Delhi will also seek more technology transfer from the EU and greater investments from EU companies in India’s infrastructure sector, instead of focusing too much on lesser important issues, such as the recent EU ban on mango imports from India.

The EU, they said, had ‘disengaged’ itself from the Broad-based Bilateral Trade and Investment Agreement (BTIA) talks for over six months as the UPA government was unable to meet their demands.

The talks were stuck also because India did not relent on the EU’s demand to eliminate or drastically reduce duties on auto (mostly luxury vehicles), auto-components and wines and spirits. EU also wanted greater access in India’s financial services market, besides high-level Geographical Indication protection for its items, including cheese and olive oil.

On India’s demand for greater market access in services, particularly cross-border supply of services (outsourcing), the EU, citing instances of breach of data protection, had expressed concerns in giving India ‘data-secure’ status. India also sought easier movement of its service professionals and wanted EU to remove its ‘restrictive’ safeguard clauses to facilitate this.

The EU wanted foreign investment in insurance to be hiked from 26% to 49% and has been waiting for Indian Parliament to pass the Insurance Laws (Amendment) Bill. The Bill, among other things, allows foreign investors to hold up to 49% in Indian insurance companies.

When the UPA government proposed the 49% foreign investment limit, the BJP had opposed it, but now the Modi government is considering the 49% limit without proportionate increase in shareholders’ voting rights. The FDI cap may be relaxed initially in non-life segments, followed by life insurance. The move could bring relief to the EU’s FTA negotiators, the sources said.

On opening up of procurement by the Central government and its entities, the EU was keen to see the passage of the Public Procurement Bill by Parliament and wanted India not to accord any preference for local firms in such procurement. The total annual public procurement in India is estimated at Rs 12-15 lakh crore and, therefore, is an important market for foreign players, including the EU.

The Bill aims to ensure transparency in such procurement and prefers open competitive bidding. As a safeguard, it exempts procurement for security, strategic purposes, procurement in public interest and those for disaster management.

On retrospective tax legislation, the Modi government has said it should be avoided, adding that it will provide a stable fiscal and legal policy with an aim to remove uncertainties troubling investors.


Arun S|The Financial Express

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