India and Europe have moved closer to finalize the Free Trade Agreement (FTA), with the prime minister’s of both the countries stating that talks have now entered a critical stage and the agreement could be finalized by the year end. Europe and India have been in talks for the last five years to carve out a deal between the two countries for increasing trade. The key areas of differences have been issues concerning the level of duty cuts on cars and alcohol, extent of liberalisation of visa rules and inclusion of government purchase rules.
India has demanded a substantial increase in work visas in various services sector and also a doing away with the inhibiting economic needs test. Europe on its part wants India to slash import duties on European cars and alcohol. India has agreed in-principle to slash import duties on cars from the existing 60% to 30%, bringing down prices of European cars such as Mercedes-Benz and Volkswagen.
However, European car makers are not happy as they want duties to be brought down to the European Union (EU) level of 6.5%, which is being opposed by the Indian industry. Similarly, negotiations are on for bringing down alcohol duties, which are at a high of 150%. India is, however, willing to reduce tariffs only on high-end liquors such as Scotch.
The two sides have also signed a joint declaration on research and innovation cooperation to widen scope and impact of the partnership, focus on common societal challenges and enhance synergies. Another declaration on enhanced cooperation on energy was signed. Both the countries have agreed to focus on a number of key energy areas. An agreement for collaboration in the field of statistical methodology and research to generate reliable official statistics about mutual economic and social conditions was also signed by the two sides.
The EU is India’s largest trading partner and the FTA also known as the broad-based trade and investment agreement, is expected to boost bilateral trade to $237 billion annually by 2015 from the current $107 billion.
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