India and the US are unlikely to sign the long-pending bilateral investment treaty (BIT) during Prime Minister Narendra Modi’s visit to Washington next month.

The US is said to be unhappy with India’s model of the BIT and has made it clear that it will not negotiate the same. The Indian model does not have the provision for most-favoured nation (MFN) and does not clarify on fair and equitable treatment (FET) provision.

A team of officials from the US Treasury Department have told their Indian counterparts that “there is a huge gap between the India’s model and US’ model of BIT”, a senior official, privy to the development, told  BusinessLine .  For instance, the absence of provision for MFN status unlike the US model —MFN helps in substantial protection of standards for investors — has become an issue.  The US also wants specific provisions to be inserted to safeguard interests of its entities investing in India. It seems to be miffed with the fact that the Indian BIT model does not have clear provisions on fair and equitable treatment (FET), which is there in the US 2012 model, sources said. 

“A lot more discussion is still needed. It will be too ambitious to expect that it can be concluded by next month,” an official source said.

A high-level delegation of officials from the US had visited India earlier this month and had held talks with Finance Ministry on the investment pact.

It had also indicated that India should use the provisions stated in investment chapters of its trade pacts with Japan and Korea as the basis of negotiating a “high-standard BIT” as those contain somewhat similar provisions that are laid out in the US BIT model. 

The next round of talks is expected to take place during the second round of India-US Strategic and Commercial Dialogue. However, to ensure early conclusion of the talks, issues of intellectual property rights and the totalisation agreement are being discussed separately.

India and the US have been negotiating the BIT since 2008 and discussions have gathered momentum since the Union Cabinet approved the text of the model treaty in December last year.

FDI flow

With the US being one of the top investors in India, it has been widely expected that it would be the first country to sign the revised treaty.

In 2015-16, the US was the fifth largest investor in India with foreign direct investment equity inflows amounting to $4,192 million.

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