Building confidence, BIT by BIT (Indian bilateral investment treaties and balancing of interests)

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 Building confidence, BIT by BIT (Indian bilateral investment treaties and balancing of interests)

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• Today's economic challenges : India's GDP growth rate is low, domestic consumption is sinking, business confidence is at a low, and unemployment is very high. And then there is the claim by ex-CEA that Indian GDP has been overestimated over the years.
• FDI equity inflows into India : The trend is alarming - From 2014-15 onwards, annual rates of growth were 22%, 35%, 9%, 3% and then (-) 1% in 2018-19.    [ CONCEPT - FOREIGN INVESTMENT IN INDIA (FDI and FPI) ]
• The saddest part : Why should this happen at all, when the China-US trade war is forcing firms to move out of China? India should have attracted many of them. But they've chosen Vietnam, Taiwan, Malaysia and Indonesia. This is happening when India is improving its Ease of Doing Business rankings.
• Why so? Because of the rigid labour laws, banking sector crisis, poor infrastructure, and a lack of real structural reforms.
• BITs : India decided in 2016 to terminate the 60 bilateral investment treaties it had. It was a unilateral termination, and indicated that India may not respect international law. Then came a new Model BIT 2016, prioritising state interest over investor interest.  [ CONCEPT - BILATERAL INVESTMENT TREATIES - BITs ]
• Why did India do so : Because by then, many global investors had started suing India in international arbitration tribunals. The GoI claimed that the 1990s and 2000s laissez-faire template of BITs was to blame!
• The neoliberal model : It is correct that foreign investors were given protection in the existing BITs, as a neoliberal agenda. But instead of scrapping the BITs, they could have been renegotiated. Now, we have a big vacuum. And we have gone to the other extreme (pro-state imbalance) in order to avoid one extreme (pro-investor imbalance).  
• Judiciary's problems : The judiciary too is responsible for large number of BIT claims. It took too long to decide on enforceability of arbitration awards. And the mass cancellation of 2G licences in 2012 without looking at BIT obligations. The MMS govt.'s decisions on Vodafone (retrospective taxation) and Devas Multimedia's (cancellation of spectrum) affected Mauritian and German investors.
• All on the same platform : All ministries and departments must be made to study the full spectrum of India's BITs so the impact is known to all. 
• Four point action plan : 

1. Correct the imbalance quickly. Strike the right balance.
2. Have no fancy notions about India's ability to attract FDI.
3. Bring clarity, continuity and transparency.
4. Reverse the outward investment trend by quick action!

• Summary : The inward foreign investment climate in India worsened immediately after India cancelled all its BITs, claiming they were too neo-liberal and anti-State, but to restore balance is crucial, as otherwise we may be harmed badly.

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