The agreement would stimulate the flow of capital, technology and personnel from India to Luxembourg and vice-versa, an official spokesperson said after the CCEA meeting.

It would also provide tax stability and reduce any obstacles in providing mutual co-operation.

In April last year, both India and Luxembourg had agreed on the text of the proposed agreement.

The concurrence to the text had come at a meeting between Luxembourgs Minister of Economy and Foreign Trade, Mr Jeannot Krecke, and the Union Finance Minister, Mr P. Chidambaram.

Indications are that the proposed DTAA would not be about financial services alone, but more about manufacturing and industry.

It is expected to benefit the manufacturing and airline companies of Luxembourg having linkages with India.

Informed sources said that Luxembourgs fund management industry had expressed keenness on a DTAA between the two countries.