Singapore has emerged as the second-biggest source of foreign direct investment for India, but the country is keen to renegotiate the bilateral agreement with New Delhi to be able to give competition to Mauritius that accounts for nearly 40% of FDI into India.
"The ongoing meeting to review the bilateral Comprehensive Economic and Cooperation Agreement in New Delhi between officials from both countries is crucial as the tricky issues in services and investments are being discussed," a government official told ET.
"It is unlikely that India will meet the demand as it is in talks with Mauritius to remove the LoB (limitation of benefit) clause," the official added.
While investments made in India by Singapore-based companies are exempt from capital gains tax, it is subject to a 'limitation of benefit' or LoB clause which lays down conditions such as minimum expenditure made by a company in Singapore. There are no such clauses in the India-Mauritius pact.
India is actually trying to build restrictions in its treaty with Mauritius and wants to use the Singapore template. Mauritius foreign minister Arvin Boolell, who was in New Delhi last week, said his country had agreed to incorporation of benefits limitation clause in the tax treaty.
Singapore also wants higher cuts on import duties on goods that go beyond what is offered under the India-Asean free trade agreement implemented last year. "Since all other Asean members get similar tax concessions that have been given to Singapore under the CECA, it wants the review to ensure higher cuts so that it has an edge over others," the official said.
While the CECA has resulted in greater flow of investments into both countries, the benefits in trade have not yet been codified. Indian industry body Ficci and the Institute of South Asian Studies in Singapore will carry out a joint impact assessment study to find out the fall-outs of the CECA on trade.
"Since we have completed seven-eight years since the implementation of the CECA, it is a good time to find out how it is working for our businesses,"said a representative from Ficci.
India's exports to Singapore in 2010-11 was $ 16.79 billion compared to $4 billion in 2004-05, while its imports in 2010-11 was $8.57 billion compared to $ 2.65 billion in 2004-05. India is looking for specific commitments from Singapore that would guarantee easier entry for professionals into Singapore in the on-going review of the seven-year-old bilateral free trade pact.
The promise made to mutually recognise professional degrees in the initial treaty is yet to be fulfilled. India and Singapore had decided to mutually recognise degrees or other qualification certificates earned in each other's countries by doctors, nurses, dentists, architects and chartered accountants.
Although professional bodies from both sides met several times, the parameters for mutual recognition of qualifications could not be finalised.
"Since India was so keen on easier entry of its professionals in Singapore and very little has happened in the area, it is logical that the Indian side has placed this on top of the agenda," said Ram Upendra Das from Delhi-based trade research institute RIS.
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2 Comments on this Story
RAJ3063 days ago
well said ....when i was in bahrain i saw a kerala association, a bongo samaj a maharashtra mandal a gujrati samaj etc etc BUT NO INDIAN ASSOCIATION CLUB OR SAMAJ
INDIA CAN IMPROVE IF WE GIVE THE STATES AUTONOMY AND EACH STATE DECIDES ITS MOST COMPETITIVE GROWTH RATE AND THIS COMPETITION WILL MAKE LIFE DIFFICULT FOR OUR POLITICIANS
Sumant Barooah3063 days ago
One lesson India can surely learn from Singapore is to how to manage their country.