emerging economies like India, EU
is one of the most accessible and open markets. Today EU accounts for nearly a quarter of India's exports and
European nation conglomerate is the second largest source of foreign direct
investment into India although the country receives a meagre 0.6 percent of
EU's global investments.Today India accounts for 1.2 percent of EU imports
and 1.4 percent of EU exports.
EU's exports to India too does not match with other comparable
markets in the world. The anomaly is being addressed to by the EU.
EU accounts for
22.46% of India’s total exports and 20.73% of total imports in
Approved FDI from EU
has significantly increased from US$ 78 million in 1991 to US$
2.31 billion in 2001.
Actual FDI inflow from EU
during this period stood at US$ 4.09 bn.
EU investments in India have concentrated on
sectors like industrial machinery; transport; electrical goods
& electronics; chemicals & consultancy.
New areas of EU investment in India include
food processing; horticulture and floriculture trade.
EU is India's largest trading partner,
accounting for nearly a quarter of the total two-way trade. Economic
liberalization in India has led to an impressive growth in the two-way
trade, which has increased from €12.17 Bio in 1993 to over €25.52
Bio in 2001.
The share of Indian exports in the EU's overall
imports is only 1.3 percent, its impact on India's overall economy is
FDI Approved ( 1991-2002)
(In Rs million)
ministry of Commerce, India
ACTUAL FDI INFLOW (1991-2000)
(In Rs million)
(In € million)
ministry of Commerce, India
INDIA-EU AGENDA FOR ACTION*
Develop further our regular bilateral dialogue on democracy &
human rights as an element in Senior Officials and Ministerial Meetings.
Intensify co-operation to promote the reconstruction of Afghanistan.
Co-operate to promote democracy, development, fundamental freedoms and
the rule of law.
Increase co-operation on counter-terrorism issues including the
implementation of UNSCR 1373 requirements and assess the opportunity for
co-operation between Europol and Indian agencies. Work towards early conclusion
and adoption of the Comprehensive Convention on International Terrorism.
Mobilize the resources needed to promote autonomous civil society
interaction and activate the EU India Think Tank Network programme. Prepare a
joint report for the next summit on the appropriate follow-up to the
recommendations tabled by the EU India Round Table.
Task our experts to consult at regular intervals on the full range of
technical issues affecting market access for our businesses.
Invite the Joint Working Group on Information Society to intensify the
dialogue on policy and regulatory issues in the run-up to the 2003 World Summit
on information Society.
Encourage common approaches on global environmental challenges
including climate change and the follow-up to the WSSD through
operationalization of the Plan of Implementation.
Build on the momentum of the new Agreement for Scientific and
Technological Co-operation and prepare India’s participation in the EC’s new
Launch negotiations for the Agreement on Customs Co-operation with a
view to exchanging instruments at the 4th EU India Summit.
Continue exploratory talks and bilateral interactions on the
feasibility of having an Agreement on Maritime Transport and to submit a
progress report to the next meeting of the India-EU Joint Commission.
Take steps for the speedy implementation of the’ "EC India
Partnership for Progress" in line with the methodology to be agreed.
Follow-up industry’s recommendations under the first round of the
"EU India Joint Initiative for enhancing Trade and Investment" in the
fields of Food Processing, Engineering, Telecommunication and Information
Technology and examine the recommendations of the Business Summit under the
second round of the "Joint Initiative" in four new sectors: Financial
Services, Power and Energy, Textiles and Biotechnology.
Invite our industry to form a Joint Group, which may select new
sectors and identify areas for joint Cooperation for FDI and Trade.
Build on the agreed orientations for the EC-India Trade and
Investment Development Programme with a view to launching it by mid-2003.
Continue to engage their experts at the appropriate levels with a view to
speedily resolving their trade issues, among others those in the areas of
Sanitary and Phyto-Sanitary rules and Technical Barriers to Trade and seek all
opportunities to improve and facilitate their bilateral trade.
As agreed at our first summit in 2000, continue an open and
constructive dialogue on the negotiations and other work launched at Doha in
order to find solutions to our respective concerns, thus contributing to the
successful and timely conclusion of the negotiations in line with our
commitments at Doha.
* As agreed at the 3rd EU-India
Summit at Copenhagen in October, 2002
The third India-EU Summit held at Copenhagen in
Demark in October, 2002 has pledged to raise the bilateral trade to € 35
billion in 2005 and to € 50 bn in 2008. The Business Summit has
recommended a number of measures to boost up India-EU trade and cooperation
in the areas of Biotechnology, Textiles
& Clothing, Power & Energy,
Banking, Life Insurance and
Recommendations of the Third India-EU Business Summit
In India & EU
Support, through a
bilateral process, a common understanding of regulatory guidelines for
Biotech products and issues so as to propose standardized rules
recognized on both sides. (Principles of equivalence, guidelines for
To undertake dialogue
about best practices and to undertake studies of the gaps in finance
in biotechnology start-ups in the EU and India.
Develop linkage between
EU and Indian research parks and collaborate in think-tanks or
studies, examining the best practices to develop technology parks such
as 'Indian Institutes of Biotechnology', with international
partnership and with international faculty and student participation.
Streamline and simplify the approval
process to create a truly single-window processing /approval authority
under the Department of Biotechnology, but consisting of permanent
representatives of other involved agencies (Environment, Agriculture,
etc.) best-in-class levels:
(a) Benchmark Indian procedures and systems with those countries where
biotech research and commercialization are in an advanced stage.
(b) Engage industry as well as public bodies in enacting simple,
transparent and well delineated rules and procedures, and to
draft out improvements to the code of procedures applying to biotech
(c) Exempt small volume consignments (test batches, diagnostic reagents and cultures) from normal customs procedures, and facilitate
clearance based on self-declaration and (if absolutely necessary)
under blanket indemnity of consignee.
Enable public access to information
concerning all recombinant and GMO research projects under
Citizens' Right to Information, and mandate all companies to
periodically report essential non-proprietary details of research
projects in a prescribed format and procedure; publish disclosures in
official website of DBT and the companies.
Extend fiscal benefits and tax
exemption to institutional and corporate investors in biotechnology
R&D and infrastructure projects, as well as to research
institutions and to all companies having a threshold rating
As 100 percent FDI in all streams of
biotechnology is applicable, the FIPB layer may be made redundant, and
related domains (such as marketing and distribution), given the
various operational regulations in each case.
Amend provisions of clinical trials
under Schedule Y of Drugs and Cosmetics Act 1940, to permit Phase I
(and Phase II) clinical trials in India, even for products, drugs not
invented in India.
Initiate debate and opinion gathering
from Indian industry, foreign players and civil society on the
perception of internationally owned IPR, as a run up to 31.12.2004,
with specific reference to patentability of microbial forms,
microbiological and biotechnology processes as well as to
patentability of API.
Recognize international depositories
for GMOs as well as parental germplasm as a sufficient proof of
ownership for all proprietary research in seeds and other planting
materials being carried out in India.
Expedite the enactment of Bio
Diversity Bill or Ordinance and implement both the WTO TRIPS and the
CBD agreement in a complimentary legislative view and ratification of
the Cartagena Protocol.
Enact enabling resolutions for setting
up of colleges and specialized institutions based on a model
curriculum for an Integrated Biotechnology and Life Sciences stream at
graduate and post graduate levels (using inputs from other
Develop and support clusters,
gathering high-tech biotech equipment and expertise, with exempt
import duties for five years on all capital goods.
Initiate and support a cooperation
project involving principal EU and Indian companies or associations
(Biotech Vision Committee) to study best practices in
legislation and administrative regulations in biotechnology sector and
to identify resource gaps in implementing a world-standard regulatory
regime in India.
Propose and support technical exchange
programs including exposure in EU biotechnology institutions and
international training of personnel involved in the approval process,
especially personnel in customs and excise departments, state level
control bodies and accredited, independent environmental research
Disseminate details of all EU's
international assistance programmes in biotechnology and create a link
between EU industry, institutions and Indian public research
Propose assistance to set up an
International Depository in India to facilitate India's accession to
the Budapest Treaty.
Partner with Ministry of Science and
Technology in setting up and operating model institute (Asia Links
In India & EU
Jointly work out the
content of Marking and Labeling provisions on industrial trade
transactions, considering the original intent of these provisions was
consumer protection for retail purchases of fabrics for
Adopt an agreement for
bilateral protection against piracy, for all registered textile
designs, as provided for under Article 25.2 of TRIPS Agreement,
provide a mechanism for implementation, under joint supervision by
Euratex and equivalent Indian associations like CII, ICMF, SASMIRA,
Sign a customs
cooperation agreement in imports and exports, to smoothen out issues
relating to customs valuation, and fund it under the Trade Development
EU and Indian Textile
Industry (Euratex and CII) to establish a joint working group to
review all tariff related issues and customs procedures related
issues, and submit a report on mutually 'workable' tariff reductions and other market access conditions, at the Fourth EU India
Take steps towards
establishing a Bilateral Trade Agreement for removal of non-trade
barriers and increased market access besides Outward processing Trade
Create an industry
level joint working group to discuss practical steps to increase trade
and investment, removal of trade barriers and increase the use of
Outward Processing Trade arrangements.
Simplify the operational procedures
for bonded warehousing schemes.
Allow textile and apparel cluster
areas to set up distributive generation model for power.
Create within a short time period, one
or more world-class Apparel and Textile Export Parks, with Special
Economic Zone (SEZ) status, in selected port cities-Mumbai and Tamil
Nadu having export clusters, follow international best-in-class
practices in these parks, including customs bonded warehousing, zone
based export clearances, etc.
In consultation with domestic
industry, take steps to reduce import duties on all textile machinery
not made in India for a period of five years to allow cost-reduction
in capital investments.
Allow relocation of EU plants especially
in made-ups and industrial textiles.
Remove disparity in excise duty
structure on the basis of fibre and enterprise size in the textile
(a) Fix uniform rate of excise/duty across all type of yarns, fabrics, knitwear
and hosiery and Small Scale Industry (SSI) units in
(b) Do away with exemptions on ginned cotton, hank yarn, grey fabric.
hand processors, knitwear and hosiery and Small Scale Industry (SSI)
units in garments.
(c) Equalise Additional Excise Duty (Textile and Textile Articles) on
mmf/yarn and cotton yarn.
Remove Small Scale Industry (SSI)
reservation on knitwear and handloom processing segments.
Allot a part of the available
textile and apparel quotas to regular, large importers having branch
offices or dedicated buying houses in India.
Cap the premium level for all
transferable quotas, to bring down transaction costs in apparel
exports and improve utilization levels.
Enact the Electricity Bill 2001, which
provides for several new features like trading, open access, etc. The
Bill is already introduced in Parliament.
Adopt a National Energy Policy,
recognising power as a basic consumer right.
Set a deadline for 'cleaning' the
Balance Sheet of all SEBs through:
(a) One-time settlement of outstanding dues payable to generating
(b) Securitization of debts through issuance of Bonds by SEBs.
Introduce/expedite multi-year instead
of annual tariff orders, with a provision for indexing the tariff with
fluctuation in fuel prices. Action for reducing technical and
(a) Enact and enforce strict anti-theft laws in all states; evasion to
be declared a criminal offence.
(b) Distribution companies should be empowered to disconnect supply to
non-paying customers without notice, and to prosecute those involved
in power theft etc.
(c) Set a deadline for 100% metering in all states, and link
disbursements to SEBs under APDRP, based on achievement of milestones.
(d) Introduce a model project involving IT as a tool to detect thefts
and faults, as a step to reducing human interface.
Concept of branch should be fully
taken into account for capital and other prudential regulations, especially
for banks that are under a consolidated supervision
authority in their home country. Possible comfort could be given by
head offices undertaking to infuse capital in case of prudential
ratios falling below the required level set by RBI.
During possible discussion on the
prior item, European banks should be allowed to delay the adjustment
to the single borrower limit beyond April 2003 in order to protect
customer relationship and easy access of companies in India to needed
funds, and to issue local currency subordinated debt as tier 2
The share of voting rights should be
aligned on the share of capital held by any investor as provided by
the Company Act.
The minimum capital requirements for
100% foreign-owned NBFCs should be lowered from the very high US$ 50
million to a level more appropriate (in terms of risks and need for
long term own funds) for such activities (suggestion: US$ 10 mn).
concept of 'compulsory' priority lending should be phased out for the
entire banking sector. The ultimate objective would be to clearly
separate 'economic development functions' from commercial operations
by banks'. The former should be taken over dedicated public
institutions. During possible policy discussions/adjustment on this
item, conditions (e.g. interest rates) should be aligned on market
conditions, and foreign banks should be allowed to 'outsource' the
bulk of this obligation considering their lack of sufficient network
to analyse the risks and find the commercial interest in this priority
Income taxation and other regulations should be homogenised between foreign and domestic institutions,
provided the previous Recommendation is dealt with.
Creation and development of a forward
interest rate market should be decided in order to improve the
liquidity management in banks and reduce maturity-mismatch risks, and
quantitative regulation on call money market resources should not
apply to banks that can demonstrate a strong asset-liability
management and control process.
Conditions applying for entry of
Indian banks should be fully transparent and based on
'objective' criteria for prudential control, including India's
compliance with BIS 26 'best practice' list of supervisory
criteria, country risk and currency convertibility. Possible comfort
(in the cases of branches) could be given by head offices
undertaking to infuse capital in case of prudential ratios falling
below the required level set by EU member states' prudential
authorities, and by a RBI commitment to provide necessary foreign
currency in such events.
Indian banks should be allowed to
market products designed, managed and lodged in India, in the EU
markets, provided all regulatory requirements in terms of the nature
of the products, disclosure, etc. be met.
Movements of qualified staff
from India to EU should be facilitated, so that Indian banks can
benefit from one of their competitive advantages in their European
Capital and subordinated loans
provided by European head offices to their Indian branches should be
protected against currency depreciation, either by allowing to keep
them in foreign currency, or by allowing banks to hedge their
Foreign banks should be allowed to
raise subordinated debt as tier 2 capital on the domestic Indian
Previously useful guidelines, which
are not adapted to the current situation, should be updated or
abolished, provided that the regulators are satisfied with the
internal operation/control processes in banks (e.g. definition of
Provisioning, of doubtful loans should
be tax deductible before the write-off/loss is declared in order to
encourage higher provisioning and stronger resistance of banks in case
of unexpected economic conditions. Symmetrically, cancellation of
prior provisions would be reintegrated in the taxable profits.
Overall supervisory functions for
multi-activity financial institutions (including financial holdings)
should be clarified and strengthened in order to avoid regulatory
overlap and duplication, regulatory arbitrage, and regulatory
'black holes,. The current board of Supervisors could be given more
powers and/or an administrative structure to deal with these issues.
Occasional and specific difficulties in some financial areas should,
not lead to indiscriminate strengthening of regulations.
by banks should be simplified and made possible through electronic
communications. Clarity of regulatory processes should be enhanced and
'single windows, for regulatory contact should be established.
Legal environment should be revised in
order to allow creditors to have a better access to doubtful
borrowers' resources. The recent regulatory change allowing
creditor to seize assets is considered a very positive step, but it is
felt very important not to limit creditors' right to the assets, but
to allow a more direct control on the borrowers' cash flows (e.g.
escrow accounts to centralize all revenues). Improved financial
information and development of ratings for a much larger segment of
corporate borrowers should be encouraged in order to prepare for
Basel-II regulations on capital adequacy. New banking products or
services should be automatically approved, provided that the banking
institution satisfies a number of overall regulatory criteria (e.g.
Islamic banking). The specific nature of banks' activities (notably
the possibilities to outsource a large number of functions at a
cost advantage) should be taken in consideration for labour reforms,
in order to give more flexibility to banks in terms of operations and
harmonisation of criteria for accepting a branch of foreign bank should be
promoted in the EU Member States, in order to facilitate a multi-country
presence by Indian institutions.
LIFE INSURANCE (HIGH PRIORITY)
The 26% limit on share participation
by foreign insurance companies should be increased, especially since
the heaviest capital increases occur in the initial stages of Life
The Income Tax Act 1961 and other
fiscal legislation should be reviewed to ensure that there is not
inconsistency between the laws on taxation of insurance companies and
Indian Insurance law as amended by the Insurance Regulatory and
Development Authority Act 1999.
Regulation on Pension should be
enacted as soon as possible while integrating regulatory issues
between various types of financial institutions.
Regulation on the training of sales
force should be based on a level examination and not on a predefined
number of training hours.
The extent to which life insurance
companies in India are or will be allowed to transfer a part of their
asset management functions to specialized Asset Management Companies
in order to benefit from outsourced/specialised expertise should be
The position and scope of
activities of banks as intermediaries in the distribution of
insurance products should be considered, given the recent Regulations
on corporate brokerage (including possibility of selling products from
INVESTMENT VEHICLES (HIGH PRIORITY)
Venture capital should be made at
least at par with Foreign Institutional Investors (FIIs); once
registered, they should have the same facility as FIIs; free
investments without need of approval from FIPB/RBI.
The tax system applied to the sector
and its products has to be made more stable to foster greater
predictability in the sector.
All government undertakings should be
allowed full choice of AMC when investing their financial
Greater flexibility and freedom for
institutional investors including banks, mutual funds and insurance
companies to invest in VCF's should be granted provided that this
remains within some size limits.
become member-states of EU on May 1, 2004.
Updated on April 24, 2003