New Delhi: India has signalled its intention to revive talks on a free trade agreement (FTA) with the European Union (EU), German ambassador Martin Ney said on Thursday.

The resumption of discussions will be a key issue on the table for talks during a visit by German Chancellor Angela Merkel to India starting on Sunday given that this is an issue “close to her heart", Ney said at a media briefing.

India pulled out of FTA talks in August after the EU banned the import of 700 Indian generic drugs over alleged manipulation of clinical trials. The cancellation was the latest setback to the FTA that has been under discussion since 2007.

Differences over the lack of access for Indian professionals to EU’s labour market and high taxes imposed on liquor and car imports from Europe have thwarted efforts to reach an accord that would boost trade between India and the EU.

Asked about the resumption of the FTA talks, Ney said: “I think it is high time that the suspended talks on the FTA should be resumed. I am certain she (Merkel) will pick up this topic as well. I do think that the India-EU FTA is very much in India’s interest. From my talks with commerce minister (Nirmala Sitharaman) and with (Indian industry bodies) Ficci (Federation of Indian Chambers of Commerce and Industry) and CII (Confederation of Indian Industry), I have the impression that there is an understanding that an FTA can contribute to the Indian economy."

“I am optimistic that given the interest of the two sides that we will come to a resumption (of talks) sooner rather than later," he added.

Merkel, who will be arriving in New Delhi on Sunday on a three-day visit, will be holding talks with Prime Minister Narendra Modi on Monday on a wide array of subjects under the framework of the Indo-German Intergovernmental Consultations (IGC).

This will be the third meeting between the two leaders this year. Modi visited Germany in April and met Merkel in New York last week on the sidelines of the United Nations General Assembly session. Accompanying Merkel will be cabinet ministers for economic affairs and energy, foreign affairs, defence, food and agriculture, education and research and economic cooperation and development.

“Germany is the only country with which India shares this comprehensive format of cooperation in various areas of strategic significance," Ney said.

The foreign ministry, announcing Merkel’s visit, described the IGC as a “unique Summit-level dialogue with Cabinet participation of both Governments that helps advance the bilateral partnership across the whole range of priority areas of mutual interest between the two countries".

This is the third such interaction between the two governments; the past two took place in 2011 in India and 2013 in Germany.

Agreements are likely in the area of security, economy, development cooperation, clean energy, climate, infrastructure, urban mobility, innovation and skills development, Ney said. “Our agreements will cover all key areas of India’s development agenda—including Make in India, Skill India, Clean Ganga and Smart Cities," Ney said.

Merkel will also be travelling to Bengaluru where she and Modi will be meeting business representatives including those representing technology companies along with the chiefs of German business houses. Representatives from the troubled German car maker Volkswagen, embroiled in a scandal over rigging of diesel emissions tests in the US, will not among those coming to India with Merkel, Ney said.

Germany has invested $8 billion in India since 2000, Ney said, adding that German companies “have very high expectations of their future investments in this country".

But German companies were facing several problems—corruption, uncertainties in taxation rules and the legal ramifications for investments in India, Ney said. “I do believe the government of Prime Minister Narendra Modi is tackling all these issues, but industry says we need to make progress on this," the German ambassador said.