The Council of EU Chambers of Commerce in India

The Council of EU Chambers of Commerce hopes to seal FTA next year- EU Ambassador Joao Cravinho

Expressing confidence that the government will soon finalize the new foreign trade policy, the European Union has said it is hopeful that the EU-India Free Trade Agreement will materialize 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 here over the weekend. 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.

Speakers at a the Council of EU Chambers in India in its Annual General Meeting identified capital goods, defence, education, skill development, food processing industries and infrastructure, particularly in logistics, urban infrastructure and smart cities as having huge scope for successful co-operation between India and European Union (EU) under the ‘Make in India’ initiative of the Indian government. Mr S P Shukla, Member-Group Executive Board, President-Group Strategy & Defence Sector, Chief Brand Officer, Mahindra Group said that there was a lot of scope for Indo-EU co-operation in capital goods and defence sectors under the ‘Make in India’ initiative. Mr Shukla was speaking at the panel discussion on ‘Challenges and Opportunities for EU Members to Embark on Make in India Mission’ organised on the occasion of Annual General Meeting (AGM) of the Council of EU Chamber of Commerce in India (CEUCCI) on Friday evening.

“Most of India’s imports are in capital goods and defence sectors. Though we are the second largest manufacturers of cigarettes after China, we import the machines from Switzerland. As such, India and EU can think of jointly manufacturing capital goods at a lower cost in India,” Mr Shukla added.

Mr Ajit Jangle, Group Chief Operating Officer of All cargo Logistics Ltd said that the China model of manufacturing may not be relevant for India, given that India’s strengths lie in making technology products for the world at global standards. Technology unit cost in India is still low. “This is the area where India can be a global manufacturing hub and few countries can compete with India in this area. To start with, this can be done with focus on domestic and Asian markets,” Mr Jangle added.

Dr Shubhada Rao, Senior President and Chief Economist, Yes Bank said that huge need for infrastructure funding, above what could be raised from domestic sources, could be met through bilateral arrangements. “India has such (funding) an arrangement with Japan already and the same kind of arrangement could be entered into with EU,” she added.

Initiating the panel discussion, Mr Vivek Mehra, Executive Director of PricewaterhouseCoopers Pvt. Ltd highlighted that skill development and training for young people, constituting 50 per cent of India’s population, would be the critical problem the EU would be able to address. Ease of doing business in India, environmental clearances, adverse tax regime and lack of uniform tax code like GST would pose challenges for Indo-EU co-operation under Make in India, Mr Mehra added.

Capt. Avinash Batra, President, Addressing in the AGM of the CEUCCI, praising the valuable contribution of CEUCCI members and EU Mission in deeply entrenched trade relations between India and EU. Listing the various activities of the Council, Capt. Batra said, during 2013-14, delegations from Bulgaria and Slovenia visited India, virtual meeting on Bio Pharma Sector between European & Indian Companies were organized in Germany. Meeting with EU Ambassadors, Trade Commissioners and Consul Generals; meeting with the Ambassador of Luxembourg and Europe Day Celebrations were few other activities organised during the year.