The Union Cabinet on Thursday approved the framework for a trade agreement with Mercosur, an alliance of Argentina, Brazil, Uruguay and Paraguay.

This will open up avenues for negotiations on a preferential trade agreement now and a free trade agreement in future.

"The signing of the framework agreement will initially pave the way for a preferential trade agreement and ultimately lead to negotiations on a free trade agreement," a government official told the media.

He said the agreement would boost India's trade with Mercosur in particular and Latin America in general.

In 2001-02, the trade between India and the Latin American countries was estimated at $1.39 billion.

While India exported goods worth $626.49 million to the four-nation alliance, its imports stood at $765.74 million.

The region still had an enormous potential as Indian exports accounted for just 0.83 per cent of the global exports to Mercosur during 2001, the spokesman added.

The Cabinet also approved the inclusion of more castes in the list of other backward classes in eight states. The decision was based on the recommendation of the National Commission of the Backward Classes, the spokesman said.

Those covered in the list include Andhra Pradesh, Haryana, Karnataka, Orissa, Rajasthan, West Bengal, Chandhigarh and Delhi.

A memorandum of understanding with Sri Lanka on starting a ferry service between Tuticorin and Colombo and establishing a joint committee to work out modalities for its implementation was also cleared.

Such services would later be extended between other ports in both the countries.

Other proposals ratified by the Cabinet included the vocational training exchange programme between India and Iran from January 2003 to January 2006 and the child welfare programme in South Asia first discussed at the South Asian Association for Regional Cooperation convention.

Cabinet decisions

• Ferry service between Tuticorin and Colombo cleared.
• Vocational training exchange programme between India and Iran also gets nod.
• Cabinet also approves child welfare programme in South Asia.