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EU and India: Rough road for FTA but a smoother one for FDI

Salma Rehman | Updated on: 9 August 2015, 15:15 IST

The Free Trade Agreement with European Union might have been held in abeyance, but this seemed to have no effect on the Foreign Direct Investment flow in India, which reportedly has received an impressive $24 billion inflow from the 28-nation bloc over the last three years.

FDI inflow to India from EU

  • 2012- 2013- $6.23 billion
  • 2013-2014- $9.06 billion (An increase of $2.83 billion)
  • 2014-2015- $8.20 billion (A decline of $862 million)
  • In 2015-16, the amount in first two months of current fiscal was $1.39 billion.
  • In total, India received $24.91 billion in FDI equity inflows from EU between April 2012 and May 2015.

FTA to boost bilateral trade

The EU has been India's largest trading partner and the two-way trade is likely to swell significantly if the countries could firm up the long-pending Free Trade Agreement, officially called the Broadbased Investment and Trade Agreement (BTIA).

India had on 5 August, delayed scheduled talks on the proposed pact later this month which was to resume after a gap of two years after the EU imposed a ban on around 700 generic drugs which were clinically tested by India's GVK Biosciences on the ground of inaccuracy in data.

EU's invitation to Modi

In March, the EU had not responded to India's proposal for a brief visit by Prime Minister Narendra Modi to Brussels, the headquarters of the bloc, during his trip to France, Germany and Canada in April.

However, it recently invited him for the India-EU summit just before or after the G-20 summit scheduled to be held in November in Turkey. The last India-EU Summit had taken place in 2012.

The two-way commerce between EU and India stood at about $99 billion in 2014-15 while it was $101.5 billion in 2013-14.

Rough road to FTA

The talks on FTA have been caught in a jam on sticky issues relating to intellectual property rights (IPR), data security for IT services and tariff in the automobile sector. The last round of talks on the FTA were held in May, 2013.

The EU has been maintaining that it was ready to show flexibility on all major issues that have stalled the talks as the FTA will be a "win-win deal" for both the sides.

The EU was also looking at insurance, banking and retail as major areas for economic engagement with India.

Launched in June 2007, negotiations for the proposed FTA have witnessed many hurdles as both the sides have serious differences on crucial issues.

Besides demanding significant duty cuts in automobiles, the EU wants tax reduction in wines, spirits and dairy products, and a strong intellectual property regime.

On the other hand, India is asking for granting 'data secure nation' status. The country is among nations not considered data secure by the EU.

India among the top 10 favorable places for FDI

India moved up six places to become, for the first time, one of the top 10 destinations for FDI in 2014, according to the United Nations Conference on Trade and Development (Unctad)'s World Investment Report 2015. It was 15th on the list in 2013.

First published: 9 August 2015, 15:17 IST