Investment Facilitation for Development: India's Non-Participation in IFD

  • In 2017, World Trade Organisation (WTO) members first formally expressed interest in new rules on investment facilitation.
  • In 2023, over 100 members of the WTO have finalized the Investment Facilitation for Development Agreement (IFDA).
  • India did not participate in the negotiations.

Investment Facilitation for Development

  • Investment Facilitation for Development (IFD) is the joint Initiative to develop a multilateral agreement on Investment Facilitation for development.
  • It aims to improve the investment and business climate.
  • It is a set of practices aimed at promoting and streamlining foreign direct investment (FDI) in developing countries.
  • It seeks to create a conducive environment for investment by reducing barriers, providing incentives, and offering support to both foreign and domestic investors.
  • Its scope does not include market access, investment protection, government procurement, certain subsidies, and investor-state dispute settlement (ISDS).

Objectives of IFD

  • Develop an investor-friendly business environment and simplify investment procedures.
  • Make it easier for investors in all sectors of the economy to invest, conduct their day-to-day business, and expand their operations.
  • Develop predictable, transparent, and open investment rules for more efficient investment flows and increased business confidence.
  • Increase FDI, though its provisions can also help domestic investors.

India’s stance on IFD

Rules of trade cannot be applied to investment:

  • Investment facilitation does not come in the scope of the WTO.
    • WTO is a forum for trade facilitation and trade-related aspects of investments only.
    • Investment is completely a bilateral issue and is linked to domestic policies on attracting foreign investments.
  • Investment facilitation would restrict the space for the formulation of domestic norms.
  • The phrase ‘investment facilitation for development’ is a misnomer.
    • There are hardly any development provisions, except extended time periods for implementation and the promised technical assistance.

Plurilateral route of negotiations:

  • The plurilateral route of negotiations under which investment facilitation is being discussed has no legitimacy in the WTO.

Investor-state dispute settlement (ISDS):

  • India does not want to join IFD because of fear of Investor-state dispute settlement (ISDS).
  • ISDS is a neutralinternational arbitration procedure.
    • A system through which individual companies can sue countries for alleged discriminatory practices.

Developing and Least Developed Countries:

  • It would be burdensome for developing and Least Developed Countries (LDCs), as nearly all the obligations that may be created are on host countries.
    • However, it may not be difficult for India to comply given the outstanding track record in FDI liberalisation and facilitation.
  • The primary focus of WTO members should be on finding solutions for food security purposes and protection for poor farmers of developing countries in case of a surge in imports.

World Trade Organization’s (WTO)

·        It is the only international organization that deals with the rules of trade between countries.

·        India has been a WTO member since 1995. It is run by its 164 member countries.

·        It also provides a forum for countries to negotiate trade rules and settle economic disputes between them.

·        The WTO is a member-driven, rules-based organization and decisions are made collectively through negotiations among members. While voting is allowed under the WTO Agreement, decision-making primarily relies on consensus.

Foreign Direct Investment in India

  • Foreign direct investment (FDI) refers to a purchase of an asset in another country, such that it gives direct control to the purchaser over the asset (e.g., purchase of land and building).

FDI Inflow in India:

  • India has attracted a total FDI inflow of USD 70.97 bn during the financial year 2022-23.
  • Total FDI inflows in the country from 2000 to 2023 are USD 919 billion.
  • Total FDI inflows received in the last 9 years (2014- 2023) was USD 595.25 bn (nearly 65% of total FDI inflow in the last 23 years).

FDI entry Routes:

  • FDI is permitted either through the Automatic or Government route.
    • Automatic Route: The non-resident or Indian company does not require any approval from the Government of India.
    • Government route: Approval from the Government of India is required prior to investment.

IFD is a dynamic field, and its strategies may vary from one country to another based on their specific needs and circumstances. It is a critical component of a country''s economic development strategy, particularly in the context of globalization and the increasing competition for foreign investment.



POSTED ON 03-10-2023 BY ADMIN
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