The European Union and India said they had resolved a dispute over generic drugs in which was referred to the World Trade Organisation last year. Indian Trade and Industry Minister Anand Sharma told Reuters the EU's trade chief, Karel De Gucht, had told Indian negotiators during an EU-India summit that the issue had been resolved, and De Gucht confirmed the agreement.

"This is a great breakthrough which will of course lead to a suspension of WTO procedings. So the dispute is over," said Sharma.

India and Brazil brought a case to the WTO in 2009 saying that the EU was wrongly stopping and inspecting shipments of generic drugs in transit. While the EU and India have settled, the EU must still negotiate with Brazil.

"I reconfirmed we are going to amend present regulation so as to put into practice what has been agreed," De Gucht told Reuters. "(Generic drug) transports in transit will no longer be checked, except for counterfeiting."

The EU said it would amend customs codes that have led to numerous seizures of generic drugs shipments on transit from India to countries in South America via Europe.

The agreement will benefit leading drugs makers such as Dr Reddy's Laboratories Ltd , whose generic drugs -- legal in India but not recognised in Europe -- have been stopped en route to countries such as Brazil.

The EU-India agreement still needs approval from the EU's parliament. (Reuters)