EU wants India to overhaul insurance sector as part of FTA
30 Oct 2013
The European Union is pressing India to raise foreign direct investment (FDI) limit in the insurance sector with proportionate increase in voting rights of foreign investors as part of a bilateral Free Trade Agreement (FTA).
A team of legislators from the European Union countries met officials in the finance and other ministries on Tuesday and urged them to get parliament approval for a number of pending bills, including the Insurance Bill and the Pension Bill, so as to smoothen the path for foreign insurance companies.
These legislators from EU countries play a critical role in ratifying trade agreements signed by the European Commission and are focused on getting the Insurance Bill passed by Indian Parliament.
''The logic of the negotiations is that unless everything is agreed, nothing is agreed. Insurance is not agreed yet,'' Pawel Zalewski, vice chair, INTA (International Trade) Committee, European Parliament told media persons on Tuesday.
''We will not be merely satisfied by a raise in FDI cap if there is no increase in voting rights,'' an EU trade official said.
The Insurance Bill in its current form seeks to raise FDI cap from 26 per cent to 49 per cent.
While an FTA (called the India-EU Broad-based Trade & Investment Agreement) is a long way off, the visiting parliamentarians, however, are looking to the passage of the Insurance Bill before the Lok Sabha elections due next year.
''The idea that we have got after talking to our Indian colleagues is that it will be difficult to get any progress in the India-EU FTA before the elections,'' Zalewski said. We urged them to pass the pending bills in Parliament so that the negotiations are facilitated, he added.
The negotiation, launched in 2007, seeks to open up markets in both goods and services, especially in the financial services, while easing investment and government procurement rules.
The 27-member EU, which is India's largest trade and investment partner, is keen on financial sector reforms in India, although the union has decided to forego its demand for changes in India's patent regime for now.
''We are aware of India's concerns about availability of cheap generics for its people and are not pressing for changes in its patent regime,'' Zalewski said.
The EU, however, is unwilling to grant India's demand for Data Secure status, in the FTA. They say the Data Secure status will encourage companies in the EU bloc to out-source sophisticated on-line business to India.
''We have set up a working group on it to help India earn the status, but it can't be part of the FTA,'' an EU official said.