India optimistic about agreeing EU trade pact


India is optimistic it can seal a free trade deal with the European Union and is urging its negotiating partner to settle the details of an agreement it says would benefit both their stumbling economies.

The two sides have disagreed over duties on car imports – India's tariff on European cars being nearly 10 times greater than Europe's on Indian vehicles – and access for India software companies to the EU market.

"For us the services sector is very, very important. We recognise the interest of the EU on wines and spirits, on automobiles," Trade Minister Anand Sharma told a news conference in the Belgian city of Antwerp.

"So it's not that there is a lack of recognition. It is fine-tuning the details that is on the table. It is not the substantive issues at all … Most of the issues stand concluded to the best of my understanding," he said on the sidelines of the Global India Business Meeting.

Sharma said he would meet European Commissioner for Trade Karel De Gucht today (26 June) to assess progress.

India, Asia's third largest economy after China and Japan, has enjoyed two decades of rapid growth power by IT and outsourcing, even if manufacturing has lagged, weighed down by red tape and creaky infrastructure.

Sharma said India planned to increase manufacturing's share of gross domestic product to 26% within a decade from 16 percent now and would invest $1 trillion over five years on infrastructure.

The minister said he could envisage foreign companies investing in both sectors, particularly in planned greenfield industrial sites.

A Free Trade Agreement would help India's growing companies expand into the EU, the country's biggest trading partner and the buyer of more than €40 billion of Indian goods and services in 2010. Europe wants access to a vast, young market of 1.3 billion potential customers.

Negotiations started in 2007 and Sharma said the two sides had agreed to finalise an FTA by the end of 2012.

The minister stressed the need for both sides to reach a deal, particularly given economic stress. Europe's economy is expected to stagnate or contract slightly this year, while India's would grow by 6% to 7%, which Sharma described as "depressing" when compared to the norm of 9%.

"An ambitious free-trade agreement between the European Union and India will be the best message that the global economy can have in the challenging times," he said.


"Today's talks were positive with both sides engaging constructively to drive the process forward," said EU Trade Commissioner Karel De Gucht and Indian Commerce Minister Anand Sharma in a joint statement.

"A number of intersessional meetings will be held and chief negotiators will also meet again in September to take stock of the negotiations. Both sides are keen to find results which are mutually acceptable so as to achieve an ambitious outcome which would give an important boost to trade between the EU and India. This is particularly important in the current economic climate," they added.


EU-India relations date back to the early 1960s when diplomatic relations were established. But it was 1994's Cooperation Agreement (which is still the current legal framework for cooperation) that opened the door to the broad political dialogue that has since evolved, notably through annual summits since 2000, and regular ministerial and expert-level meetings.

In recognition of both sides' political and economic importance, the EU-India Strategic Partnership was launched in 2004 to enable the two partners to better address complex international issues in the context of globalisation.

To underpin the Strategic Partnership, leaders adopted the EU-India Joint Action Plan (JAP) at their 2005 summit. The JAP defined common objectives and proposed a wide range of supporting activities in the areas of political, economic and development cooperation.

In recent years, the establishment of a Free Trade Agreement between the two partners has gained momentum and a deal was expected in the spring of 2011, but disagreements have marred talks' progress.