India and China are all set to sign an Investment Protection Agreement during the high profile visit of Chinese President Hu Jintao to New Delhi later this month.
The proposal to enter into such an agreement was cleared by the Union Cabinet on Thursday.
"The Bilateral Investment Promotion and Protection Agreement will lead to a rise in investments between China and India and will be in force for 10 years," Information and Broadcasting Minister Priyaranjan Dasmunsi told reporters after the meeting.
Trade between the two countries has been growing rapidly over the last few years. Bilateral trade is expected to touch $20 billion (Rs 9,000 crore) during this financial year rising from $18.7 billion in 2005-06.
Other countries with whom India has similar bilateral investment protection agreements include Britain, Russia, Germany, South Korea, Sri Lanka, Spain and Thailand.
The two countries are also pressing ahead to sign a trade treaty in the near future.
Beginning with a preferential trade agreement, the two countries may graduate to a comprehensive economic cooperation treaty (CECA). Trade relations are rapidly improving with Beijing having recently granted tariff concessions to New Delhi on export of 700 items.
The concessional tariff regime on Indian goods and services exports is a quid pro quo arrangement in accordance with the Bangkok agreement as against procuring similar relief from India on 106 items.
Indian exporters will have to comply with the rules of origin stipulated by Chinese government to avail the concessional tariff rates.
India is also contemplating such trade and investment agreement with the European Union and Japan.
EU Trade Commissioner Peter Mandelson will be in the city during the next two days to work out a possible such pact.
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