India, EU should have trade and investment pact: CII

Thursday, 12 October 2006, 19:30 IST
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Helsinki: India and the European Union (EU) should begin negotiations for a trade and investment pact with a detailed analysis of the competitive sectors, says the Confederation of Indian Industry (CII). In a statement here, the business chamber said that the two sides should identify specific sectors where trade and investment flows can be enhanced. India and the 25-nation EU are planning to commence negotiations for a trade and investment agreement that is expected to comprehensively cover substantial tariff liberalization in goods, comprehensive liberalization in services and improve investment flows. As of now only about 10-15 products cover more than 90 percent of bilateral trade. These products include textiles and clothing, chemicals, pharmaceuticals, marine products and iron and steel among others. CII feels that the proposed agreement will give an impetus to the current trade and investment flows and bilateral trade could reach euro 70 billion within the next two years. If the current growth rates in trade continue by 2012, when India and the EU should have a trade agreement in place, bilateral goods trade could be around euro 150 billion, according to CII. Services trade could also see a substantial rise and could reach close to euro 75 billion. India and the EU also need to tackle non-trade barriers that exist in each other's markets, according to CII. The European Union is India's largest trading partner, accounting for 21.6 percent of New Delhi's global trade in 2005. India was 10th largest trading partner of the EU in 2005, up from 15th slot the previous year. The EU exports to India mostly intermediate products. The top five items are pearls, precious and semi-precious stones, gold, electronic goods and organic chemicals. India's exports to the EU consist of primary goods and finished products. These include readymade garments, cotton including accessories, gems and jewellery, primary and semi-finished iron and steel, and machinery and instruments. Bilateral trade in services has grown substantially in recent years. Total trade in services for 2003-04 stood at euro 7.1 billion, up from euro 5.7 billion in 2002-03. Services exports from India amounted to euro 3.8 billion, while imports were euro 3.3 billion in 2004-05. India expectedly enjoys a positive trade balance in services trade with the EU. In bilateral trade in services, the main products exchanged were transport services, travel services and business services. India has made impressive progress in IT, tourism and medical services and in some financial services. The EU is leader in professional services like accounting and legal services, financial services, telecommunication, postal and courier services. While the total trade between India and the EU almost doubled during 2001-06, India experienced higher negative trade balance. The average rate of import growth during this period was 14 percent, as compared to average growth rates in exports of 11.8 percent. The EU is India's largest source of FDI. In 2004 this totalled euro 1.1 million. Nevertheless, India gets les than one percent of total FDI from the EU, which implies a huge potential of further investments from the EU.
Source: IANS