The US also wants India to streamline the system of resolving corporate disputes in the country and make the regulatory mechanism in the key sectors like telecommunications “more transparent”. Washington even indicated that the US businesses would “welcome more cooperation and collaboration” in regulation drafting processes.
Though the US wish-list is not being seen as a pre-condition to finalise the bilateral investment treaty with India, sources said that it was now under consideration at the highest echelons of Prime Minister Manmohan Singh’s Government.
The UPA Government last week raised the limit of investment by Foreign Institutional Investors or FIIs in the debt market by $ 5 billion each in government and corporate bonds. The move will take the total that the FIIs can hold in the debt market at any time to $ 30 billion – $10 billion in government and $ 20 billion in corporate bonds. The foreign investors can invest the extra funds only in securities from infrastructure companies having residual maturity of at least five years.
Sources said that the Government was now examining if it could open up the key sectors like defence, insurance and retail further and also studying the possible political implications of such a move.
Significantly, the Department of Industrial Policy and Promotion recently brought out a page discussion paper on opening multi-brand retail to foreign investors – almost three-and-a-half years after a letter from Congress president Sonia Gandhi to Prime Minister Manmohan Singh halted the debate over the issue in February 2007.
Gandhi had shared the concern of the leftist parties, which were then part of the ruling UPA. The DIPP’s discussion paper hinted that the Government was ready to open up the retail sector further – apparently because the leftists are no more constituents of the ruling coalition.
The US missive to India to raise or remove the investment limits in certain sectors came at a time when Washington is trying to allay New Delhi’s concerns over H1B visa fee hike and Ohio State Administration’s ban on outsourcing the government’s IT and back office projects to offshore locations.
India and US have been exploring possibilities of a bilateral investment agreement for quite some time, but it did not make much headway till recently, apparently because internal discourse within the Obama Administration was still on.
Discussions on the investment agreement gained momentum after the US Under Secretary of State for Energy, Economic and Agricultural Affairs Robert Hormats visited New Delhi last month and conveyed to the Indian officials that the treaty could be one of the deliverables of Obama’s visit to India in early November.
