Nearly ten years after its 2015 Model Bilateral Investment Treaty was released, India is now set again to revamp its approach to bilateral investment treaties (“BITs”) – this time, in order better to attract and incentivise inbound foreign investment.
On 4 March 2025, the Government of India’s Chief Economic Adviser V Ananda Nageswaran confirmed that India will revise its model BIT to attract foreign investment. This latest announcement echoed Finance Minister Nirmala Sitharaman’s 2025-26 Budget speech in February 2025, noting the need to revamp the BIT to become more investor-friendly. The Chief Economic Adviser noted India’s status as a current account deficit country in need of both portfolio and direct investments.
The move marks a significant reversal of India’s prior position on investment treaty protection. As Volterra Fietta previously reported, India moved almost a decade ago to terminate its BITs and replace them with new treaties modelled on its 2015 India Model BIT. That Model BIT set out significantly reduced protections for foreign investors, following a series of high-profile investor-State arbitration losses by India. Alongside reduced substantive protections, the Model BIT also required foreign investors first to pursue local court remedies for a minimum five years before recourse to international arbitration.
India’s change in policy direction comes at a time of significantly reduced foreign direct investment into India. The United Nations’ 2024 World Investment Report, for example, noted sizeable declines in Indian foreign direct investment inflows – the fifth largest absolute decrease among the world’s top 20 host economies. From 2022 to 2023, India recorded a decrease in foreign direct investment inflows from USD 49.4 billion to USD 28.2 billion.
In his recent statement Nageswaran highlighted the complex “balancing act” of “balancing investor protection with State sovereignty … safeguard[ing] national interest with encouraging foreign investment”. The timing for finalising India’s revamped model BIT is not yet clear. It remains to be seen to what extent the new model BIT will protect inbound investors, be reflected in future Indian BITs and, in time, assist in restoring recent steep declines in foreign investment. In the meantime, investors and informed observers will be watching closely for improved investor protections in forthcoming BITs or trade agreements already under negotiation by India, such as those with the European Union, Qatar, Saudi Arabia and the United Kingdom.
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