Though the economic activity in the country is affected, the credibility of the monetary policy framework should not be undermined. Explain (200 Words)
Refer - Business Standard
Enrich the answer from other sources, if the question demands.
IAS Parliament 5 years
KEY POINTS
· India recently amended its FDI policy by subjecting investments from countries with which it shares a land border to screening under the approval route and making them ineligible under the automatic route.
· Although none of the WTO agreements directly seek to regulate it, some contain provisions that may have implications for foreign investment.
· One such agreement is the General Agreement on Trade in Services (GATS). GATS allows trade in services based on a positive list approach, i.e., WTO members list the sectors in which they wish to make commitments for trade in services.
· One of the modes through which trade in services takes place is ‘through a commercial presence’ of the service supplier in the territory of another member.
· One of the general disciplines is the most favoured nation (MFN) treatment, which requires members to ensure all other members equality of opportunity to supply like services in sectors where foreign competition is allowed.
· While India might seek to justify the regulation under the general exceptions or essential security interest provisions of GATS, it may be difficult to explain why the regulation has been applied for select countries, given that threat of acquisition of domestic industries is the same from all foreign countries.
· Unlike international practice, by selectively applying the regulation to certain countries and not to others, India makes itself vulnerable to Chinese claims in respect of certain service sectors under the GATS.
· In such a scenario it may be advisable for the Indian government to adopt a more facially neutral regulation that does not de jure discriminate on the basis of origin of the investment and applies equally to all countries.
