THE Government of India has clarified that the FDI policy is a
pre-establishment instrument and therefore, not covered by Bilateral Investment
Protection Agreements. BIPA is a post-establishment agreement. This implies that
once an investor enters the country, that investor must be treated the same as a
domestic investor unless the limitations to national treatment are clearly spelt
out at the pre-establishment stage.
CECA/CEPA: In these agreements, India has taken both pre
and post establishment commitments. In the pre-establishment commitments, the
FDI policy has been bound, which means that any rollback would require
consultations with the partner country and could entail quid pro quo in terms of
concessions in some other area. Within the FDI policy, commitments may be taken
only in some specified sectors (positive listing). Since FDI in multi brand
retail trading was not allowed when these agreements were negotiated, none of
these agreements is affected by the recently approved policy. Moreover, state
and local regulations are not a part of the commitments.
Multilateral/WTO: Multi brand retail trading is
classified as a service and therefore covered by the General Agreement on Trade
in Services (GATS). India has not undertaken any commitments in this area under
the GATS. As such, there is no impact of the policy on our commitments under the
WTO. Investment is not a part of WTO disciplines except through Mode 3 under
GATS.
The
recently approved policy on FDI in multi brand retail trading provides,
inter-alia, that it would be the prerogative of the states to allow a multi
brand store. The policy nowhere provides that it is applicable only to certain
states. The policy itself is a national policy and can potentially be applicable
to all the states that are desirous of implementing it. The local and
state-level regulations which govern shops and establishments are the
prerogative of the respective state governments. The policy explicitly
acknowledges this position. The opening up of FDI in multi brand retail trading
is a liberalization measure and remains so with all the conditionalities, given
the fact that currently FDI in multi brand retail trading is not allowed at all
in India. The decision does not violate any commitments/obligations arising out
of India`s international agreements.
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