India, Japan may ink pact

India and Japan are expected to announce a Special Economic Partnership Initiative (SEPI) during the visit of Prime Minister Manmohan Singh to Tokyo next month.

SEPI, mooted by the ministry of external affairs, will provide a window to boost Japanese investment in sectors such as infrastructure.

"SEPI will tap Japanese investment in proposed areas like the railway freight corridor and free trade warehousing zones. SEPI will ultimately be a part of the Comprehensive Economic Partnership agreement or the Economic Partnership Agreement," said an official.

The two sides are also expected to announce the setting up of a joint task force headed by commerce secretaries of both sides for initiating the CEPA negotiations, likely to be concluded by 2008.

After the European Union, Japan will be the second developed state with which India is seeking to finalise a bilateral economic pact. Officials said that segments like information technology in the services sector and agricultural items such as spices andmarine exports would get a boost under the pact.

There are, however, concerns that finalising an economic pact with a developed country like Japan would require India to offer tariff cuts on many items.

"An enabling provision of 1979 under GATT (General Agreement on Tariffs and Trade) lays down that an agreement with a developed country would require both sides to extend tariff cuts on a substantial portion of trade. However, since the agreement is silent on what 'substantial' is, it could mean coverage of 90 per cent or 70 per cent of the existing trade," an official said.