The ambitious plan for an India-EU bilateral trade and investment agreement (BTIA) has hit a roadblock with the two sides unable to find a common ground on how services trade will be eased. Also, they have been unable to resolve contentious issues of outsourcing and movement of labour.

According to commerce ministry sources, the agreement is unlikely to be clinched by the end of the year, as planned earlier. The EU is asking for greater market access in India’s banking and insurance sectors, while India wants clarity on how the trade will be eased under mode-1 (outsourcing) and mode-4 (cross-border movement of persons).

New Delhi, which has had the experience of its trade partners reneging on their initial promises in the area of services after clinching deals on merchandise trade (India-Asean pact is an example), is keen to avoid a similar outcome. India’s forte is in services and EU must declare India as a safe harbour, an official said, on condition of anonymity. The BTIA has missed several earlier dates owing to these differences.

In mode-1, EU continues to be wary of data security when it comes to outsourcing business processes to India. New Delhi has been reiterating that it is ?data-secure?, citing the local presence of major international companies that have set-up their offices and R&D centres in India. Similarly, on Mode-4 ? movement of natural persons for providing services ? India pushes for better access and removal of safeguard clauses that may hamper the actual realisation of concessions offered by EU. India is also pushing for more access for domestic industry and its agricultural products.

The BTIA is a comprehensive agreement covering a gamut of areas, including goods, services, investment, trade defence and customs cooperation, among others. Fourteen rounds of negotiations have taken place on the proposed pact and the fifteenth round began in June this year.

In the services sector, India wants the EU to ensure free mobility of professionals without restrictions, such as experience norm whereas the EU wants greater commitment by India to allow foreign investment in various services like multi-brand retail, insurance, banking, postal and courier services, legal services and accountancy services. (Recently, India autonomously notified 51% FDI in multi-brand retail and is reportedly considering hiking FDI levels in insurance and pension sectors).

However, India has stated that ?given the present world economic situation, we should be realistic and ambitions should be tempered with reality so as to finalise and sign the agreement by the end of this year.?

With the euro-zone economy forecast to shrink by 0.3% in 2012 and with the commission predicting zero growth for 2012 for all the 27 countries in the EU and 1.3% growth next year, the economic situation in the EU is fragile.

The EU put forward its concerns with regard to market access and patent issues and till now, the two sides have aggressively discussed slashing import duties on cars and liquor.

According to Biswajit Dhar, director-general of the New Delhi-based Research and Information System for Developing Countries, services are the most sensitive part of the negoatiations and are yet to come up in the negotiations.

The EU has put forward a slew of demands, including removal of all restrictions pertaining to branch licenses, foreign ownership of both public and private banks, numerical ceilings on the number of branches, differential taxation and voting rights.

As per India?s revised offer at WTO, the number of branch licences issued to foreign banks has been increased to 20 per year. “EU has not done any deal previously without considering the environment and labour aspects. Besides, they also want restrictions in our banking and insurance sector to be knocked off,? Dhar said.

The bilateral trade between India and EU in 2011 was $108.8 billion, which increased from $83.46 billion in 2010. The exports in the year 2010 were $41.15 billion, which increased to $ 54.74 billion in 2011. On the other hand, imports in the year 2010 were $42.32 billion, which also increased to $54.07 billion in 2011. For the period January- April 2012, exports were $16.17 billion and import stood at $18.53 billion. The total trade for this period was $ 34.7 billion.