BITS in Pieces

Syllabus: GS-III

Subject: Economy

Topic: Trade and External sector

Issue: Bilateral Investment Treaties

  • Bilateral Investment Treaties (BITs) are agreements between two countries for the mutual promotion and protection of investments in each other’s territories, by individuals and companies.
  • The first BIT signed by India was with the UK in 1994.
  • Challenges faced by India w.r.t. BITs:
    • Multiple investor vs state disputes at international arbitration centers.
    • Burden on the public exchequer.
  • This led to the adoption of the 2016 model BIT.
  • The 2016 model:
    • it was seen more as a protectionist measure rather than a nuanced and calibrated approach to encouraging foreign investment.
    • Major trade principles such as “fair and equitable treatment” and “most favored nation” were absent.
  • In 2021, the Parliamentary Standing Committee on External Affairs made several recommendations to revisit the existing BIT regime.
  • Conclusion: Robust international trade and stable investments will be critical to India’s goal of a $5-trillion economy.
Prelims Connect:

Most-favoured-nation (MFN): Under the WTO agreements, countries cannot normally discriminate between their trading partners. This principle is known as most-favoured-nation (MFN) treatment.

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