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Indo-US bilateral investment talks on hold

Economic Times | 8 May 2009

Indo-US bilateral investment talks on hold

Amiti Sen, ET Bureau

NEW DELHI: The election process in the US and India seems to have put discussions on the bilateral investment treaty (BIT) - a pact to ease investment laws between the two countries - on the backburner. The talks, which were scheduled to be held in January this year, got postponed as the newly-elected US government was not quite prepared for it.

The two sides have not yet been able to come up with a new date for the meeting, as India is in the election mode now. The talks will resume only after the new government is in place in India, a government official said.

“We are badly behind schedule for the next round of discussions on the proposed BIT. Last year, both sides, especially the US, had shown a lot of interest in putting the talks on fast track.

However, the poll process in both the countries seem to have taken the steam out of the talks,” a government official said. India has already signed a number of bilateral investment promotion agreements (BIPA) with other trading partners, including Australia, the UK, France, Germany and Russia.

Interestingly, the US-India Business Council, a business advocacy organisation representing top American companies investing in India, has already urged US President Barack Obama to sign BIT with India in its wishlist prepared in March this year.

The US is keen on getting pre-investment national treatment status as part of BIT. India, so far, only offers post-investment national treatment to foreign investors which means that once a foreign company invests in India, it will be subjected to the same laws for investment protection which are applicable to domestic investors.

If India agrees to give pre-investment national treatment, it will have to take responsibility for losses incurred by a foreign company before it actually invests in the country, if the loss takes place because of a policy change. So, if a company spends money in carrying out studies and activities such as market research before investing, India will be responsible for making good the losses if that company is not able to invest in India.

India, which gives pre-investment national treatment only to Singapore, is not too keen on extending it to other countries as it feels that it could affect its policy making. “We are not sure if the new US government will equally push for pre-investment national treatment as the old government. We can find out only when the talks re-start,” the official said.

 source: Economic Times