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NEW DELHI, Wednesday (AFP) India and the European Union hope to increase their annual bilateral trade from 25 billion euros to 50 billion euros by 2008 but this will depend on New Delhi's economic reforms, an EU official said.

"We in the EU are encouraging India's economic liberalisation programme and we would like to see the disinvestment process continuing," Michael Sternberg, Denmark's ambassador to India, told AFP.

"The whole economic reform programme is a necessity to pull in further foreign direct investment," he said.

Denmark holds the rotating presidency of the 15-member EU, which is India's largest trade partner, accounting for 30 percent of its exports and imports.

Last year the EU countries provided five billion euros of foreign direct investment into India, up from two billion euros in 2000, Michel Caillouet, the head of the EU delegation in India, told a media conference.

Due to stiff opposition from trade unions and politicians, the government has only managed to raise 50 billion rupees (one billion dollars) from privatisation in the current year against a targeted 120 billion rupees.

In September, Indian Prime Minister Atal Behari Vajpayee postponed a plan to privatise Bharat Petroleum Corp. Ltd. and Hindustan Petroleum Corp. Ltd. after opposition by Oil Minister Ram Naik and Defence Minister George Fernandes.

Reports earlier this month said the privatisation of the state-owned National Aluminium Co. Ltd. (NALCO) located in the eastern state of Orissa, had also run into strong opposition and due diligence was unlikely to resume until February.

NALCO is considered one of India's major privatisation targets after the sale of stakes in telecoms carrier Videsh Sanchar Nigam Ltd. and petrochemicals company Indian Petrochemicals Corp. Ltd.

Sternberg said the EU did not expect "a reversal or flattening out" of India's reform programme, adding that it would have a negative impact on ongoing and projected ventures if the process stopped.

Referring to the third India-EU business meeting held on the sidelines of a prime ministerial summit in the Danish capital Copenhagen last month, Caillouet said there was strong participation by companies and officials from both sides.

"There is a perception that India is changing and India is the place to be," the EU envoy said.

R.S. Lodha, president of the Federation of Indian Chambers of Commerce and Industry (FICCI) said India and the EU had identified food processing, mechanical engineering, information technology and telecoms as potential areas of cooperation.

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