Disagreement between India and Canada over the sequencing of the bilateral investment treaty and the free trade agreement being negotiated could hold up both pacts if neither side relents.

While the Canadian international trade minister, in his recent visit to New Delhi, insisted that the investment pact — formally called the Foreign Investment Promotion and Protection Agreement (FIPPA) — be signed first, his Indian counterpart Nirmala Sitharaman was not willing to fall in line, a government official told BusinessLine .

“The Indian negotiators clearly told the Canadians that both agreements have to be agreed upon simultaneously as only that would result in a balanced outcome,” the official said.

The Comprehensive Economic Partnership Agreement (CEPA), which involves liberalisation of trade in goods and services by bringing down tariffs and investment barriers, also has a separate chapter on investments, but a FIPPA exclusively focuses on investments.

The proposed FIPPA between the two countries will basically aim to protect Canadian investments in India and help them establish commercial presence which is covered under mode 3 of supply of services, the official explained.

India, on the other hand, is more interested in the other modes of services related to movement of professionals and cross border trade which are covered under the CEPA.

“It would be unfair to conclude an agreement in one mode in the form of the FIPPA while leaving the modes of supplies India is interested in by postponing the CEPA. It might result in India not getting a good deal,” the official said.

Canadian International Trade Minister Francois-Philippe Champagne, in an interview with BusinessLine during his visit, had said that investors from his country, including pension funds were uncomfortable in the absence of a FIPPA and felt that it was restricting the scope and volume of investments. He stressed that since the FIPPA was a simpler agreement, it should be signed first while the CEPA could follow.

Rejecting the argument, Sitharaman said that New Delhi would try its best to expedite negotiations so that both pacts get signed at the earliest.

“Simple or not, the fact remains that the two agreements are inter-connected. Therefore, it is imperative that they get concluded together,” the official said.

Canadian investments in India is progressively increasing with over $12 billion of investments pouring in from Canadian companies such as Scotiabank, Sun Life Financial and McCain Foods in the last two years alone.

With an outward investment of over $750 billion in 2015, the country holds huge potential for India as a source of funds.