Foreign Investment

The Law Commission of India's 260th report contains a seemingly innocuous suggestion to include a clear clause for consent to arbitrate investment disputes in India's 2015 draft Model Bilateral Investment Treaty. There is an intriguing absence of any explanation for this suggestion, which is curious, especially when viewed in the context of the global public debate on investor-state dispute settlement clauses. This suggestion requires robust public debate in India and must not silently sail past.

This paper attempts to evaluate the implications of China's accession to the WTO in terms of its impact on the country's exports, imports and foreign investment inflows, and also discusses the likely effect of these developments for the Indian economy. The paper argues that in case of China, the changes consequent to accession to WTO will see an increase in economic activity, leading to a higher GDP growth rate. For India, the Chinese challenge can be met only if we strengthen the competitiveness of our economy further by undertaking additional reforms and improving infrastructure.

In the era of the rise of industrial capitalism and its development in western Europe and the USA the transfer of part of the income from the major colonies played a critical part in boosting investment in western Europe and allowing enormous amounts of investment to be directed towards sustenance of the mass migration of Europeans to overseas colonies such as the USA, Canada, Australia, New Zealand or South Africa. However, the size and even the direction of the flow of surpluses have been obscured by the usual methods of calculating the value of foreign trade from the mercantilist era down to the present. The author's recalculation of the surplus extracted by Britain from India and Burma demystifies the astonishment expressed by most commentators about the very large proportion British foreign investemnt formed of its GDP and the apparently perverse desire of the British to retain an empire which was less profitable than, say, investment in the USA. The realisation of the enormous surplus was an integral part of the mechanism by which the white-settled colonies were populated and equipped and therefore could not be treated as a substitute for that process.