The proposal, unusual in most free trade agreements, has raised concerns in New Delhi by limiting its ability to act unilaterally during crises, because the two parties aim to conclude the agreement by the end of 2025.
India has in the past imposed restrictions on outings, especially during a monetary crisis in 2013.
In its proposal to India, the EU suggested a surveillance committee on the trade in investment services and policies that would examine actions in politics, including those taken during financial crises or balance of payments.
“India fears that such monitoring could allow the committee to question or overthrow political measures in times of crisis taken by it, which compromises the decision -making powers of a sovereign,” said one of the sources.
India, which exchanges $ 190 billion in goods per year with the EU, also asked for clarity on the question of whether the decisions taken in an emergency, such as restrictions on capital flows, could be canceled if the committee finds them inappropriate. While trying to limit India’s control over the decisions of capital accounts, the EU proposes that it would have the right to impose temporary restrictions on capital outings for serious economic difficulties. India argues that this creates an imbalance in safeguarding powers and deviates from the EU own practice in ALF with Vietnam, Singapore and South Korea, where both parties can apply such measures in exceptional circumstances, said the source.
The two sources have refused to be identified because they are not authorized in the media.
The emails sent to the Reserve Bank of India, to the Ministries of Finance and Commerce and to the Prime Minister’s office requesting comments did not receive an answer.
Search for balanced commerce pacts
India’s opposition to the EU’s proposal occurs as it is negotiating agreements with other business partners, including the United States and Australia.
Accepting surveillance or unequal guarantees could limit India’s powers on domestic policies and could weaken their efforts for balanced commercial pacts in the future, sources said.
“India has not agreed on the FTA so far because of questions like these … because each country of the block wants its point of view or its interest to be included,” said a source from the Ministry of External Affairs.
The European Commission, in its report to the continuation of the July negotiation series in Brussels, said that “good progress” had been made on capital movements, payments and transfers, with discussions focused on the remaining areas of divergence.
India-EU trade negotiations have faced obstacles on EU efforts to reduce import taxes on cars and dairy products while looking for more strict climate and work rules. India wants to protect local farmers, avoid rigid green rules and keep control of legal disputes.
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