Foreign Investments in India Current Affairs - 2020

Land Acquired from Tamil Nadu and Uttar Pradesh Defence Corridors to increase Defence Production

On March 23, 2020, the Defence Ministry announced in the Parliament that it has acquired land from the State Governments of Uttar Pradesh and Tamil Nadu. As Land is state subject, it is important for the centre to acquire land from the state government for development projects.

Highlights

The GoI is planning to increase Defence Exports to 5 billion USD in next five years. In order to achieve this, the Government is expanding its investment opportunities. Thus, it has acquired land from the state governments in their respective defence corridors. The land acquired from Tamil Nadu so far is 1,182 hectares and from Uttar Pradesh is 1,537 hectares.

Policy initiatives in Defence Manufacturing

The GoI has taken several initiatives to increase manufacturing in Defence Sector. They are as follows

  • The “Strategic Partnership” Model was introduced where the manufacturers shall make partnerships with Indian Entities and set up manufacturing units through technology transfers
  • The FDI policy was revised for the defence sector where 100% investment is now allowed through Government route
  • Defence Investor Cell was created to address the issues related to investments and its related regulatory measures.

Claims against India under Bilateral International Treaty dismissed

The Bilateral International Treaty organization, an international arbitration tribunal recently dismissed all the claims against India.

Highlights

The claims against India was brought the organization by private firms in Cyprus and Russia. The claims were under Agreement between Government of Russian Federation and Cyprus for promotion and protection of investments. The claims have now been dismissed completely.

Bilateral Investment Treaty

BIT is an agreement that was established for FDI. It allows countries to set up rules for investments between each other. The treaty is the successor of the 19th century friendship, commerce and navigation treaty.

The first BIT was signed between Pakistan and Germany.

BIT ensures that foreign investors are treated equally as that of domestic investors. This is because, foreign investments are restricted by governments to promote domestic entrepreneurs. For instance, US restricts foreign investment in only 5 sectors and China restricts foreign investment in 100 sectors.

Significance

India entered BIT in the mid-90s. It is important for India to sign BIT to make conditions favourable for foreign investors. While most of the treaties in the world focus on ‘most favored Nation’ treatment, BIT treats foreign countries equally.

India and BIT

According to the data of Ministry of Finance, India has so far signed BIT with 75 states. Out of these 66 are already in force and 9 are yet to be entered into force. India has signed 40 BITs with less developed and developing nations.

As every other country, India has set its own BITs clauses. BIT clauses of India is not the same for all the countries. The most important feature of India’s BITs is that it does not provide right to make investment in India to the signatories. Every investment has its own rules fixed by India.