EU Urges India to Liberalize Insurance Sector
Oct. 30 – As part of the proposed bilateral free trade agreement (FTA) between the European Union (EU) and India, the EU is pushing India to increase the allowable level of foreign direct investment (FDI) into its insurance sector in addition to increasing the voting rights of foreign investors. Presently, the maximum amount of FDI allowed into the insurance sector is just 26 percent – the EU would like to see this increased to 49 percent.
The Indian Cabinet has already approved the FDI increase. However, this decision must now go through an approval process in the Lok Sabha (the lower house of the Parliament of India).
Pawel Zalewski, vice chair of the European Parliament’s International Trade Committee, underscored the importance that the EU attached to these issues by stating: “The logic of the negotiations is that unless everything is agreed, nothing is agreed. Insurance is not agreed yet.”
The EU is pushing India to complete its negotiations on the FTA before the Indian Lok Sabha elections, which are slated to take place early next year, because if the negotiations are not completed it may be necessary to start the whole process again from the beginning.
Progress, however, looks illusory according to Indian officials.
Additionally, Indian lawmakers have been loathe to move forward on the legislation due to worries about the current financial recession and the large-scale regulatory issues that are part of the EU banking system.
Further, in order to facilitate the negotiations, the EU has already chosen to drop its calls for India to reform its patent regime.
According to an EU study, a successful completion of the FTA would result in the creation of at least two million jobs for Indians. The agreement will include 95 percent of the tariff lines between the two areas and comprise a market of over 1.7 billion people.
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