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Turning the clock back
Posted:Mar 27, 2017
 
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With several bilateral investment treaties lapsing on March 31, FDI inflows could take a hit
Come April 1, the Narendra Modi government would have taken India back to the pre-1991 inward-looking economic era as far as India’s approach to bilateral investment treaties (BITs) is concerned.
Till the early 1990s, India didn’t sign BITs because foreign investment was not considered significant in a statist India. The absence of BITs meant foreign investors couldn’t use international arbitration to hold India accountable under international law for any detrimental regulatory overreach. So, when the Foreign Exchange Regulation Act that came into force in 1974 required a foreign company to convert foreign equities into minority holdings of 40%, many helpless foreign companies like Coca-Cola, IBM, Kodak and Mobil either quit India or applied to the government to do so.
In 1991, India lifted its self-imposed economic exile by starting the process of experimenting with the market and wooing foreign investors. As part of this image makeover, India started signing BITs from the early 1990s. The signing spree continued unabated till 2010 with India inking BITs with 83 countries. However, rattled by many BIT claims brought by foreign investors from 2011 onwards, last year, India unilaterally issued BIT termination notices to 58-member countries. Reportedly, these BITs would lapse on March 31 after the expiry of the mandatory one-year notice period. Although the terminated BITs will continue to be relevant for existing foreign investment in India and Indian investment in these countries for the next 10-15 years due to survival clauses, any new investment, either from these 58 countries to India or vice versa, shall not enjoy BIT protection as was the case before 1991.
 
 
Read more at :- http://www.thehindu.com/opinion/op-ed/turning-the-clock-back/article17684494.ece
 
The Hindu, March 28, 2017
 
 
 
 
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