Both sides are looking to complete free-trade agreement to double bilateral trade to more than $200 billion by 2013.
NEW DELHI—India and the European Union (EU) have agreed to speed up negotiations for a long-anticipated free trade pact, hoping to sign an agreement later this year to nearly double trade between the two.
India’s Prime Minister Manmohan Singh said considerable progress had been made during a one-day New Delhi summit with top EU officials in resolving market disputes that have prolonged free-trade negotiations into a fifth year.
“There are complex issues involved, but we have both agreed to expedite discussions,” he said.
European Commission President Jose Manuel Barroso, who led the EU team, said the two sides expect to reach a final deal in the fall.
“The EU-India FTA will be the single biggest trade agreement in the world benefiting 1.7 billion people—nearly a quarter of the world’s population,” he said.
Both sides are anxious to reach a deal quickly to double trade to around $200 billion by 2013 from $107 billion this year.
The EU, following a year of economic turmoil, wants access to India’s young and fast-growing market of 1.2 billion people.
For India, gaining easier access to European markets would bolster its reputation among major world economies. More practically, it could help India weather a recent economic slowdown that has seen growth rates fall from 9 per cent two years ago to below 7 per cent this year.
The EU is India’s largest investor and trading partner, taking 19 per cent of India’s exports and supplying 14 per cent of its imports. The European bloc has also invested more than $33 billion since 2000, while Indian investments in Europe amount to $30 billion.
India has heavily used coal-burning power plants—accounting for 55 per cent of its power supply—to feed its fast-growing energy needs. But uncertainty over the price of coal and securing adequate supplies in the future have raised concerns about whether it can reliably continue fueling Indian growth at low cost.
While India is anxious to increase wattage, end chronic power cuts and reach 400 million people who still have no access, it also says it is among the world’s most vulnerable to climate change.
The European Union, meanwhile, has pledged ambitious cuts to fossil fuel emissions blamed for global climate change and has imposed aggressive airplane emissions taxes recently that have upset the U.S., Russia, China and India.
India, meanwhile, is also pushing the EU to open further to Indian workers.
Merchants there have much to gain from a free-trade pact. The country takes in only 2.6 per cent of Europe’s exported goods and supplies only 2.2 per cent of its imports. Those numbers could jump drastically if it can meet European demands for finalizing a pact, including increasing intellectual property protections and lowering taxes on imported liquor and cars.
The Indian auto industry has loudly objected, saying such a move would kill domestic manufacturing.