India to revamp bilateral investment treaty framework: CEA

With evolving global investment dynamics, the revision of the BIT model is expected to address investor concerns

India will revamp its model bilateral investment treaty (BIT) framework to attract as well as protect foreign investments, aligning it with evolving global economic realities while guarding national interest, chief economic Adviser (CEA) V Anantha Nageswaran has said.

Last revised in 2015, the BIT framework has been criticism by foreign investors for its stringent dispute resolution rules and limited protections.

"The new model BIT will be more attuned to the demands of a dynamic global investment environment,” Nageswaran said at the post-budget webinar on March 4.

Nageswaran comments come a few days after finance minister Nirmala Sitharaman said that bilateral trade agreements were the way forward in the changing global economic climate.

The framework will reflect India's sovereign rights and the importance of regulatory space so that “public policy priorities are not constrained by international legal obligations”, the CEA said at the "Regulatory, Investment, and Ease of Doing Business (EODB) Reforms" webinar organised by the department of financial services (DFS).

A BIT is an agreement between two countries that lays out the terms and conditions for private investment by nationals and companies of the two sides. These treaties typically include provisions for investment protection, dispute resolution and legal frameworks to safeguard investor interests.

In her Budget speech, Sitharaman stressed the need to revamp the BIT model to make it more investor-friendly while balancing sovereign rights.

What will new framework do?

India has been working on revising its BIT model since 2016 to address investor concerns while safeguarding its policy space.

Many older agreements were unilaterally terminated after the model BIT, which introduced stricter clauses on dispute settlement and investment protection, was adopted in 2015.

Foreign investors have flagged what they say is a lack of strong protections and predictability in the new framework.

Foreign investment plays a crucial role in economic growth, particularly as India runs a current account deficit.

"We are a current account deficit (CAD) country, so we need both portfolio and direct investments," Nageswaran said.

The revamp of the BIT framework is also driven by the need to align with international norms while ensuring that public policy interests are safeguarded.

Sitharaman said last month that future BITs should strengthen guidance for arbitrators in dispute resolution and be negotiated independently rather than as part of Free Trade Agreements (FTAs).

India is holding BIT talks with the United Kingdom, Saudi Arabia, Qatar, and the European Union (EU). The country signed its first BIT with the UK in 1994 and the most recent with the UAE and Uzbekistan in 2024.

The revised BIT model is expected to address investor concerns, strengthen legal safeguards, and support India's long-term economic growth strategy.