India, US set to sign Bilateral Investment Treaty

American Treasury Secretary to meet Chidambaram on Oct 9

 India and the US are likely to make a pitch for early signing of a Bilateral Investment Treaty (BIT) during Finance Minister P Chidambaram’s meeting with American Treasury Secretary Timothy Geithner in New Delhi on October 9.

The move comes close on the heels of the Congress-led UPA government’s reform blitz that prompted opposition Bharatiya Janata Party (BJP) and the Left to accuse Prime Minister Manmohan Singh of succumbing to US pressure.

Notwithstanding opposition’s criticism over opening the door for US multinational Walmart and other foreign retail giants, New Delhi is understood to have decided to move ahead to add momentum to the negotiations for a BIT with Washington.

Confirming that New Delhi and Washington were working on a BIT, India’s envoy Nirupama Rao recently told a conference in Chicago that it would “enhance transparency and predictability for investors, and support economic growth and job creation in both countries”.  Robert Hormats, American Under Secretary of State for Economic Growth, too told a conclave in New York that the US and India were “aiming for a BIT that would provide a high level of openness to investment across the economy, strong rules on investor protection and transparency, and effective means for resolving investment disputes.”

 The critics, however, are concerned over possibility of such a treaty – like the similar ones with other countries – undermining domestic justice system for resolving investor-state dispute. Several civil society organizations a few months ago wrote to Singh, warning him that the US multinationals could misuse the BIT provisions to challenge – and, in some cases, even reverse – government’s actions, domestic legislations and regulations.

 Chidambaram and Geithner will jointly chair the third annual meeting of the US-India Economic and Financial Partnership on October 9. This is going to be Geithner’s first meeting with Chidambaram after the latter took over as finance minister.

New Delhi hopes that the government’s decision to allow foreign capital inflow to airlines and multi-brand retail would boost US investment in the country. India received $10709.69 million FDI from the US between April 2000 and June 2012. India’s FDI into the US reached $3.3 billion in 2010, registering a 30 per cent rise from the previous year.

New Delhi has been projecting India’s investment requirements of more than $1 trillion in infrastructure over the next five years as an “enormous opportunity” for US businesses.

 India has so far entered into agreements with 82 countries for promotion and protection of bilateral investments. The government constituted a committee of secretaries last July to examine state-investor dispute issues arising out of the agreements. The move came after Sistema Joint Stock Financial Corporation issued notice to government invoking India-Russia bilateral agreement to protect its investment in the wake of Supreme Court’s order for cancellation of its 2-G telecom licence.