India will have to reconsider its strategy on insurance sector liberalisation at the next round of talks under the General Agreement on Trade in Services (GAT) of the World Trade Organisation (WTO) starting from the year 2000, as it would inevitably face pressure from the US and other European countries to open up the service to foreign companies, said Masamichi Kono, counsellor, Trade in Services Division, at the WTO.
"India has a year left for it do so," Kono said. GATS is a framework agreement among countries to liberalise trade in all services except government services.
When asked about the international fallout in the event of India failing to liberalise the domestic insurance sector, Kono said: "At the moment this would not have any fallout on India because India has not made a commitment to liberalise the insurance sector."
During the last round of GATS negotiations earlier this year, India managed not to commit opening up its insurance sector. Kono, however, pointed out: "India will have to reconsider its strategies for insurance in the next round of talks.
US and other European countries may put pressure on India to open up the insurance sector.
However, on India's commitment to the WTO on banking sector reforms, he said India's performance has been satisfactory.
These commitments are for the minimum number of foreign banks that must be allowed to operate in the country during a financial year_-which is twelve, and which India has already fulfilled.
He said the next round negotiations will cover all service sectors. Preparation for these negotiations has started in the WTO Council for Trade in Services, he pointed out and said that WTO members will need to prepare for those negotiations and develop further strategies for domestic reform in line with the progress in their international commitments.
"For developing countries, the challenge is how to reap the benefits of liberalization in a way conducive to economic development and prosperity," he said.
He said macro economic conditions are not always in favour of quick liberalisation and for that matter the principle followed by GATS is "progressive" liberalisation.
This would mean higher levels of liberalization in trade in services through successive rounds of multilateral negotiations.
