With several bilateral investment treaties lapsing on March 31, FDI inflows could take a hit
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.
BITs and foreign investment
The second study, a very recent one by Niti Bhasin and Rinku Manocha, considers the impact of BITs on FDI inflows in India from 2001-2012. This study also demonstrates that BITs signed by India contributed to rising FDI inflows in the said period by providing protection and commitment to foreign investors.
It is nobody’s case that BITs alone determines FDI inflows, but they do play a critical role in mitigating regulatory risks and thus encouraging investors to invest — critical for India, which has a dubious distinction of not being a friendly place to do business in.
Few takers for the Model BIT
To be fair to the government, it wants to sign new BITs with all these 58 countries based on the new Model BIT adopted in 2016
However, most developed countries have not shown much interest in the Model BIT because instead of striking a balance between investment protection and state’s right to regulate, it tilts towards the latter.
the EU-Canada CETA contains a ‘most favoured nation’ (MFN) provision — a cornerstone of non-discrimination in international economic relations — which is missing in the Indian Model BIT. Second, the Indian Model BIT, unlike the EU-Canada CETA, mandatorily requires foreign investors to litigate in domestic courts for five years before pursuing a claim under international law. Third, the EU-Canada CETA provides protection to foreign investors in situations where the state goes back on the concrete representations it made to lure an investor, which the investor relied upon while investing. The Indian Model BIT is silent on this, thus exposing foreign investors to regulatory risks. Fourth, the EU-Canada CETA talks of pursuing the establishment of a multilateral investment court to settle investment disputes.
Eve-teasing leads to restrictions on women’s mobility
The India Human Development Survey (IHDS) of over 42,000 households across the country, organised by the University of Maryland and the National Council of Applied Economic Research (NCAER), shows that in 33% of the households, all the food shopping was done by men, and 22% of the women did not go to a local kirana shop alone.
This is quite an omission given that the primary cooks in 98% of these households were women.
. Over 30% of the women surveyed said they would not go to a local doctor or health centre alone.
Reporting sexual harassment
However, the IHDS statistics reveal a pattern. In 2004-05, when male respondents were asked how often women/ girls are harassed in their neighbourhoods, 14% said that this happened at least sometimes, while 20% of the women in the same households reported the prevalence of harassment in the same neighbourhoods. In 2011-12, when the same households were interviewed again, the proportion of male respondents reporting harassment increased to 21% and women to 31%.
Women who live in neighbourhoods where they don’t perceive the possibility of sexual harassment are 1.33 times more likely to be comfortable going to a health centre alone than those who live in neighbourhoods where harassment is pervasive.
Day-to-day aggressions that women and girls face in their own neighbourhoods is not violence perpetrated by strangers; it is the aggression young men visit upon women who share their community.
Laws against eve-teasing and sexual harassment are necessary but not sufficient to address this challenge.
The 2017-18 Budget committed to setting up Mahila Shakti Kendras in rural India.
Young women must be prepared to reclaim their lives from harassment and young men must be taught to take pride in a masculinity that stands in solidarity with women.
Delays in the Indo-U.S. nuclear deal bring an opportunity to re-examine the energy basket
Ever since it was announced in 2005, the Indo-U.S. civil nuclear agreement has faced one obstacle after another. So this week’s news that its operationalisation may be further delayed owing to Westinghouse’s financial difficulties and Japan’s procedural issues in ratifying the deal with India should come as no surprise.
The cost of importing reactors, relative to those based on indigenous design, is another concern
Land acquisition issues remain, along with the need for large water reservoirs for the reactors, which will only grow if the government goes ahead with its plans for 55 reactors of 63,000 MW in total by 2032
In addition, given concerns about a possible tsunami scenario along the Andhra coast, where many of these reactors are planned, the Department of Atomic Energy and NPCIL are looking for options farther inland.
The promise of nuclear power has thus far outweighed all of these concerns, and India has reason to be proud of its technology and determination to look for non-fossil alternatives in its energy planning.
However, with rapid progress in technology in other renewable energy sources such as wind and solar power, the collapse of oil prices and the expansion in gas projects as a viable and clean alternative, that promise has dimmed. These could also be more cost-effective for a developing country such as India, as the energy can be made available in smaller units, and then built up, unlike nuclear plants where nothing can be transmitted until the whole plant is complete and attains critical status.
This is the best time for India’s energy planners and government to use the breathing space provided by the delays in the Indo-U.S. civil nuclear deal and take a long, hard look at the cost-benefit analysis on the nuclear power balance sheet.