In an initiative driven by the Prime Minister's Office, India is likely to provide duty-free access to about 500 items imported from Singapore as part of the comprehensive economic cooperation agreement between the two countries.
Moreover, tariffs on 1,300 traded items will be reduced over the next four years, beginning April 2006.
Duty-free import of the 500 items is expected to be allowed from September this year, when the free trade agreement for goods and services is signed.
According to government officials, the tariff reduction will, however, be subject to the approval of the Cabinet.
Singapore had sought lower, some of them zero, duties for over 4,500 items of trade. The PMO-led proposal meets about 40 per cent of this demand.
During 2002-03, these 500 items accounted for $700 million in Customs duty collections, nearly half the total realisation from Singapore. The list includes chemicals, textiles goods and machinery, and other equipment imports.
Commerce ministry officials pointed out that as low duty did not hamper exports to the city state, India was negotiating investments in shipping, aviation and special economic zones in return for greater market access.
But after seven rounds of negotiations, it does not seem likely that Singapore companies will invest significantly in India.
Rules of origin, mutual recognition agreements for inspection of agricultural consignments and a mandatory 40 per cent value-addition norm are the other irritants that have cropped up during talks.
Also, the finance ministry is opposed to a proposal for setting up branches of stock exchanges, because it feels significant gains will not accrue to Indian companies, most of which prefer to be listed on US bourses.