The Hindu Business Line : Cabinet okays economic agreement with Singapore

The pact is designed to offer an integrated package governing trade in goods and services, an agreement on investment, mutual recognition agreements in services and cooperation agreements in areas such as education, e-commerce, the media and intellectual property.

Briefing newspersons, the Union Commerce and Industry Minister, Mr Kamal Nath, described the agreement as a "milestone, as this is India's first such comprehensive economic cooperation pact, besides a first of its kind of a bilateral economic integration agreement in services."

The CECA , scheduled to be signed by the Prime Ministers of India and Singapore on June 29, during the visit of the Singapore Prime Minister, Mr Lee Hsien Loong, to India, is all set to take effect from August 1.

Mr Kamal Nath said that in trade in goods, India's offer contains four lists — the early harvest programme (EHP) where customs duty would be eliminated immediately on the entry into force of the CECA on 506 lines; the phased elimination of 2,202 lines and the phased reduction of 2,407 lines where the tariffs would be eliminated/reduced till 2009 with a negative list of 6,551 tariff lines where no concessions have been offered.

In all, trade in goods will entail exchange of tariff concessions under the eight-digit harmonised system (HS) code covering 11,666 lines. But officials said that in the 506 items for EHP, mostly information technology products, which enjoy zero duty entry under the World Trade Organisation ITA (Information Technology Agreement), are there, apart from some commodities that dominate the two-way trade.

Mr Kamal Nath clarified that Singapore has offered "all products made in India entry at zero duty into Singapore." As Singapore is a known trading hub, the CECA would be helpful in fostering supply chains from India. The mutual recognition agreements in goods provided in the CECA would increase India's exports, especially milk, milk products and poultry.

Allaying apprehensions about third country products piggybacking on the concession route, Mr Kamal Nath maintained that sufficient safeguards have been built into the agreement.

Stringent rules of origin comprising the simultaneous application of change in tariff heading, value addition of 40 per cent and some well-defined operations have been prescribed to ensure that only the goods, which are actually manufactured in Singapore and India, benefit under this agreement.

In services, India will allow Singapore's Temasek Holding Pte and Government of Singapore Investment Corporation to own as much as 20 per cent of local companies as part of the CECA. SEBI had earlier put a cap of 10 per cent of investment by a foreign institutional investor (FII).

"We expect FII investment from Singapore to rise to $5 billion with the implementation of this pact in the first year. Similarly FII investment in India's infrastructure would add another $2 billion," the Minister said.

The accord, which includes a free trade agreement, would allow DBS Group Holdings Ltd, the biggest Singapore bank in terms of assets, United Overseas Bank Ltd and Overseas Chinese Banking Corporation, to start operation in India, the Minister said.

He added that Singapore, in turn, would give qualified banking status to branches of Indian banks to operate in Singapore.

A key component in services is the provision pertaining to movement of natural persons (Mode 4), which is a crucial mode for supply of services for India. "In Mode 4, mutual recognition agreements will be entered into within a period of 12 months in architecture, accountancy and medicines. Around 120 professions are being recognised from India for the purpose of obtaining visas," Mr Nath said.

Under the CECA, the extant pact on the Double Taxation Avoidance Agreement has been amended through a protocol providing for sharing of information and improved tax treatment on the lines of a similar treaty with Mauritius.

When contacted about the CECA, the Director General of the Research and Information System for the Non-Aligned and Other Developing Countries, Mr Nagesh Kumar, told Business Line here that this all-encompassing pact would be a gateway to India for accessing the vibrant markets of South East Asia and East Asia.

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