NEW DELHI: (Mar 31) Issues related to the proposed free trade agreement (FTA) and bilateral investment treaty between India and the UK are expected to be figured out during the three-day visit of Finance Minister Nirmala Sitharaman to London from April 8-10, official sources said.
The minister will attend a host of meetings, including the India-United Kingdom Economic and Financial Dialogue in London.
Sitharaman is likely to hold a bilateral meeting with the UK’s Chancellor of the Exchequer, Rachel Reeves, and other British ministers.
“Issues pertaining to the trade agreement and bilateral investment treaty (BIT) may also come up for discussions between the two,” the official said.
Though negotiations for a free trade agreement fall under the domain of the Union Commerce Ministry, issues like the investment treaty and norms related to financial services come under the Finance Ministry.
In the proposed trade pact between New Delhi and London, these issues are still not resolved.
On February 24, Commerce and Industry Minister Piyush Goyal and UK Secretary of State for Business and Trade Jonathan Reynolds announced the resumption of negotiations for the proposed FTA between the two countries.
The India-UK negotiations are resumed after a gap of over eight months.
The talks were launched on January 13, 2022. So far, 14 rounds of talks have been completed.
The two countries are actively negotiating on three different fronts: an FTA, a bilateral investment treaty (BIT), and a Double Contribution Convention Agreement.
In the BIT, the sticking point between the two nations is with regard to the resolution of disputes.
BITs help promote and protect investments in each other’s countries. One key difference in these negotiations is the mechanism for settling disputes.
India wants foreign firms to exhaust local judicial remedies before resorting to international arbitration, but its partners resist due to the lengthy nature of Indian judicial proceedings.
The model BIT text of India requires investors to resolve disputes through India’s legal system for at least five years before seeking international arbitration.
In the BIT with the UAE, India has reduced the local remedies exhaustion period from five years to three years. The India-UAE Bilateral Investment Treaty (BIT) came into force on August 31 last year.
India negotiates these treaties with other countries based on the Model BIT text.
The government on February 1 announced a revamp of the current model Bilateral Investment Treaty (BIT) to make it more investor-friendly and attract foreign players.
The announcement assumes significance as only a few countries have accepted the existing model tax treaty, and most of the developed nations have expressed their reservations about the tax with regard to provisions like the resolution of disputes.
These pacts are important as India has earlier lost two international arbitration cases against British telecom giant Vodafone and Cairn Energy plc of the UK over the retrospective levy of taxes.
In the trade agreement, India is looking for greater access for its students and professionals in the UK market, besides market access for various goods at no customs duty.
On the other hand, the UK is seeking a significant cut in import duties on goods like Scotch whisky, electric vehicles, lamb meat, chocolates, and certain confectionary items.
Britain is also looking for more opportunities for UK services in Indian markets in segments like telecommunications, legal, and financial services, including banking and insurance.
The bilateral trade between India and the UK increased to USD 21.34 billion in 2023-24 from USD 20.36 billion in 2022-23. Britain is the sixth-largest investor in India. The country received USD 35.3 billion in FDI between April 2000 and September 2024.
The talks may get a boost as India has announced to raise the foreign direct investment cap in the insurance sector to 100 percent from the existing 74 percent.
