The Indian textile industry has expressed cautious optimism regarding the government’s recent stance on Bilateral Investment Treaties (BITs) and their inclusion in Free Trade Agreements (FTAs). The Finance Ministry’s decision to keep BITs separate from FTAs is seen as a prudent move that could safeguard India’s interests and protect domestic industries.
BITs, while essential for fostering foreign investment, have often been a source of controversy, particularly due to the Investor-State Dispute Settlement (ISDS) mechanism. This mechanism allows foreign investors to sue governments directly in international arbitration tribunals, potentially leading to significant financial liabilities.
The government’s model BIT, introduced in 2016, aims to mitigate risks associated with ISDS by imposing stringent conditions on foreign investors. However, many countries have found the model BIT to be too restrictive, particularly the five-year exhaustion period for local remedies.
The textile industry, which is heavily reliant on foreign investment, recognises the importance of attracting capital. However, it also emphasises the need for balanced agreements that protect domestic businesses and workers. By separating BITs from FTAs, the government can negotiate each agreement on its own terms, ensuring that the interests of the textile industry and other sectors are adequately represented.
The recent India-EFTA FTA, which excludes investment protection and ISDS, sets a positive precedent. The textile industry hopes that this approach will be adopted in future FTAs, particularly those with major textile-producing countries.
While the government may need to make some concessions to facilitate BIT negotiations, it is crucial to maintain a strong stance on issues like ISDS. By striking a careful balance between attracting foreign investment and safeguarding domestic interests, India can position itself as a reliable and attractive destination for global textile businesses.
