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US seeks national treatment status for investments in India |
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02/09/2009 |
| The Indo-US talks on a bilateral investment treaty saw the US asking India to give pre-establishment national treatment status for investments by the US companies.
This means that investments by US companies will not go through the screening process undertaken by government agencies like the inter-Ministerial Foreign Investment Promotion Board (FIPB).
Pre-establishment is a fundamental aspect (of investment treaties) that the US have concluded with other countries, Mr Demetrios Marantis, Deputy Trade Representative of the US, said.
National treatment is a fundamental principle in bilateral trade and investment agreements, which ensures that foreign companies and products are subjected to the same rules and conditions that domestic ones enjoy.
"The idea of a bilateral investment treaty is to help improve investment conditions in both India and the US. Negotiations are going on and we will probably take some time to do this. This is the first round that we had here right now. We are very optimistic about it. We hope to create an environment where investments of both India and US are protected," Mr Marantis explained.
India has not given pre-establishment national treatment to any of the 62 countries with which it has similar agreements—known as Bilateral Investment Promotion and Protection Agreement (BIPA).
Foreign investments into the country are controlled through policy documents known as Press Notes, which are prepared by the Department of Industrial Policy and Promotion. While most sectors do not require any permission for foreign investment inflows—intimation to the Reserve Bank of India is enough—some sensitive sectors are regulated.
This is done by capping foreign investments in these sectors, which includes media, defence and single brand retail. Sectors in which no FDI is allowed include multi-brand retail.
Also, foreign partners have to take a clearance from their Indian partners, if they want to invest in the same sector. "There are several policy guidelines, which are there to ensure that undesired investments do not enter the country. A pre-establishment national treatment could make such guidelines redundant," Mr Bishwajit Dhar, Director-General of RIS, a New Delhi-based think-tank, said.
The government has been opposing inclusion of investment norms in the multilateral trade talks under the Doha Round. It was because of the country’s insistence that commitments on investments were dropped from the Doha Round.
US is India’s third largest investor. Between April 2000 and May 2009, US companies invested $ 6.5 billion. But investments here are also routed through tax havens like Mauritius.
The US has signed bilateral investment treaties with 40 countries. Such treaties are governed by a fixed set of guidelines known as the "model text". |
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