Articles ASEAN-India Centre. “We encourage India to step up engagement of ASEAN in fulfilment of Prime Minister Manmohan Singh’s look-east policy,” the minister said. “India and ASEAN had a commemorative summit in December 2012, the outcomes were good, emphasised the importance of the relationship and agreed on the elevation of the relationship to a strategic partnership and the leaders
endorsed the ASEAN-India vision statement,” Shanmugam said.
panded to something under USD 20 billion last year.
The Foreign Minister also spoke of robust economic partnership that Singapore shares with India.
India’s trade with rest of ASEAN has progressed well.
India-Singapore trade grew from about USD 9 billion from 2004 before they signed the FTA (free trade agreement) to USD 24 billion last year, he pointed out. Indian investment in Singapore which was something under 500 million in 2004 ex-
Trade has increased by 40 per cent to USD 75 billion surpassing the 2012 trade target of 2012. The minister also welcomed the conclusion of ASEAN-India Free Trade Agreement (AIFTA) services and investment negotiations which is to be signed soon.
India looking at benefits of currency swaps with trade partners International
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ndia is exploring possibilities of entering into currency swap agreements with trade partners aiming to shore up exports and bring down trade deficit, which is putting pressure on the rupee. “A need arises to examine the issue of currency swap agreement and its impact on the Indian trade policy ... the matter is of particular interest to Ministry of Commerce,” a senior government official said. Senior officials of Commerce and Finance ministries will discuss the issue later this month. The meeting, scheduled for August 20, will also be attended Reserve Bank officials. India has signed currency swap agreements with Japan ($ 15 billion) and Bhutan ($ 100 million). China has shown active interest in entering into such an agreement with India but it is yet to be signed. The meeting is taking take place at a time when several countries are “actively en-
gaged” in entering into currency swap agreements with their counterparts. Currency swap agreements involve exchange of one currency for another currency and are generally motivated by the comparative advantage. The Commerce Ministry has already sought views of the Centre for WTO Studies, a Delhi-based institute, on the impact of currency swap agreements on trade policy. The institute, in its concept paper submitted to the Commerce Ministry, said such agreements help in fund management and currency risk management, among other things. It further said such agreements with those countries with which India has trade deficit, may have both positive and negative effects. “Therefore, India may opt for signing currency swap agreements in local currencies on an experimental basis with a
few selected countries and based on the experience may decide to continue these further,” the concept paper said. A dollar swap arrangement, it further said, would help India in supporting the rupee, which has depreciated significantly against the US currency over the past few months due to various global and domestic factors. Currency swaps have emerged as an important derivative tool after the global financial crisis of 2008 to hedge the exchange rate risks. Swap agreements in US dollar, the concept paper said, provide confidence to the market and prevent excess volatility in financial and foreign exchange markets. The rupee tumbled by 63 paise to 61.40 against the dollar in late morning trade on fresh buying of US currency by banks and importers in view of fall in the equity market. The currency has lost over 16 per cent since April.
India, US to negotiate Bilateral Investment Treaty International
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he Government of India has communicated its willingness to negotiate a Bilateral Investment Treaty (BIT) with the Obama Administration. The Indian Government has signaled its acceptance and positive response towards a BIT, India’s Commerce and Industry Minister Anand Sharma said at a press conference after meeting US Trade Representative Mr. Michael Froman in Washington. The move of the Indian Government comes a few days after the US and China 10 | India Newsletter
agreed to restart discussions on a bilateral investment treaty. In a BIT, governments commit to protect investments made in their territory by nationals of the other country. A BIT between India and the US would provide protection to US investors from arbitrary, discriminatory or confiscatory Indian Government measures, enforceable by recourse to independent international arbitration, according to the USIndia Business Council (USIBC). Such a treaty could help bring additional
investment in India, and also provide protection to Indian companies as they expand investments in the US. The treaty for investment protection could also serve as a building block for a more comprehensive free trade relationship. The process could build confidence among various U.S. interests, including the Congress, of a more liberalized environment in India and a greater readiness by India to proceed with trade liberalization, within a framework of legally binding international commitments.