Germany pressed India on Thursday to raise the foreign equity cap in the insurance sector and reduce tariffs on automobile imports as a prelude to the long-awaited India-EU Free Trade Agreement, as the two countries signed six pacts, including one under which a German loan of one billion euros (about `7,000 crores) will be provided for a green energy corridor in India.
After talks with Prime Minister Manmohan Singh here, German Chancellor Angela Merkel said India and the EU had not yet overcome “all the difficulties” in reaching an agreement to conclude the FTA.
India is pressing Germany, Europe’s biggest economy, to provide a “strong political thrust” to pave the way for the broad-based Bilateral Investment and Trade Agreement with the 27-nation European bloc.
Ms Merkel, who jointly co-chaired the second round of the Inter-Governmental Consultations with Dr Singh, however, minced no words when she said the increase in the insurance cap by India was “undeniably” a key issue, apart from resolving issues like tariff rate quotas on the imports of German cars, services and intellectual property rights.
“We want progress in signing of the EU-India free trade agreement. We are in a situation where it seems as if we can get there. We have not yet overcome all difficulties,” Ms Merkel told reporters, while urging the Indian side to be more “accommodating”.
Dr Singh said he and Ms Merkel were agreed on the “importance” of an early conclusion of a “balanced” India-EU FTA. “We agreed on the importance of an early conclusion of a balanced India-EU agreement,” he said.
Dr Singh said his government was ready to liberalise the insurance sector, and the Union Cabinet had already
approved a proposal that was awaiting parliamentary approval. The Cabinet had cleared FDI hike in insurance from the current 26 per cent to 49 per cent.
India and Germany on Thursday signed six agreements on diverse fields like education, agriculture and clean energy. Dr Singh said: “Economic ties have been a defining feature of our relationship. Germany is one of our largest economic partners globally. I encouraged increased German participation in India’s rapid growth and our plans to modernise and upgrade our manufacturing and infrastructure sectors.”
Besides bilateral relations, Iran, Afghanistan and steps to combat terrorism were among other issues that figured in the consultations.
Ms Merkel said the FTA was at a “dynamic stage” of the negotiation process. “Insurance is undeniably an important subject from the point of view of Europeans... The Indian government has been expressing recognition of that fact... For a country like Germany, given the importance of the automobile sector in my country, it is important for us that automotive industry receives an appropriate treatment.”
She also said while on some subjects the two sides had not made progress, there were areas like agriculture on which no more discussions were needed, terming it as a “step forward”.
The Indian PM admitted there were some issues that had “held back conclusion” of the FTA: “There are problems in the level of tariff protection we could give to the Indian automobile sector. We had a thorough discussion on this subject. I hope when (India-EU) ministers meet in Brussels later this week, further progress can be made.”