Mumbai, December 15, 2014: Expressing confidence that the government will soon finalise the new foreign trade policy, the European Union has said it is hopeful that the EU-India Free Trade Agreement will materialise next year. "We are actually not very far from the agreement but we are not there yet. I am quite positive that next year or so it would be possible to finalise the free trade agreement, EU Ambassador Joao Cravinho told PTI. Parties on both the sides are engaged in good political conversations and there has been a commitment from both the sides on finalizing the FTA but this is yet to be translated into actual progress in negotiations, Cravinho, said while delivering his keynote address on the 22nd Annual General Meeting of the Council of EU Chambers of Commerce (CEUCCI) in India here.

"The Indian government has been a little slow; slower than we wanted to, in producing the new trade policy," the envoy said acknowledging that since trade agreements last for as long as 15-20 years, a delay of a few months in policy formulation is not relevant. Towards late last month there were reports that government may drop its plan to come out with a new foreign trade policy (2014-19) this fiscal due to the alleged differences between the finance and the commerce ministries over tax incentives mainly the minimum alternate tax (MAT) on SEZs and the dividend distribution tax on export units. The new five-year policy is expected only from April next. Commerce and industry minister Nirmala Sitharman had in September said that the new five-year FTP would be different from the previous ones and hopefully announced soon.

Earlier, the government had planned to introduce a new FTP immediately after the Budget in July. It was later scheduled for mid-August and subsequently pushed to end October. "We expect that the New Year we will see a new trade policy. Once that happens, we will be able to sit down again and resume our negotiations," Cravinho added. Keeping in mind India's growth imperative, Cravinho said the EU is open for an asymmetrical agreement. However, both sides must be agreeable for a little bit of give and take, he added. Stating a case in point, Cravinho pointed to the difference in taxation on cars imports from Europe as opposed to cars being exported. "We understand India's growth imperative and are keen to have a very positive interaction. And so the agreement will be asymmetrical. At the moment, tariff (on cars imported from Europe) is up to a 100 per cent, whereas the duty on car shipped to Europe is only 7-8 per cent. "We are not saying they have to be equal on both sides but they should be proportionate...taxation has to come down quite significantly," he explained. India ships 2,00,000 cars to Europe each year while Europe exports about 40,000 cars to India, he further added.

Cravinho said although he is optimistic about India, the country, at present, is well below its potential as an investment destination than many of its competitors. "In my conversation with EU business leaders, and we share the optimism (on India), there is also very much a recognition that the environment for investment has not yet changed significantly. There has been some change but it is more of a psychological than substantive nature," he said. The government needs to improve the investment climate further, leading to increased inflows that will help build the country's manufacturing capacity, he added. Talking about the 'Make in India' initiative, Cravinho said it reflects the government's ambition and will also help the country enter the global value chain. He also said the last year's ban by EU on India's Alphonso mangoes is likely to be lifted soon.

For more information please contact Dr Renu Shome Director, CEUCCI, Tel: 022-22854563, Email: info@euindiachambers.com