India Set To Revise BIT Framework To Attract More Foreign Capital, Ease Investor Concerns

India is preparing to overhaul its model Bilateral Investment Treaty (BIT) framework to make it more attractive to foreign investors amid a sharp slowdown in foreign direct investment (FDI) inflows and continuing global economic uncertainties.

Department of Economic Affairs Secretary Anuradha Thakur said the review of the existing template is nearing completion and the revised framework is likely to be placed before the Union Cabinet for approval soon.

Net FDI inflows have declined considerably in recent years. Reserve Bank of India data show that annual average inflows fell from around $40 billion between FY20 and FY22 to $7.65 billion in FY26.

Government Reviews Investor Dispute Rules

Thakur said the government is examining the dispute settlement mechanism and several other provisions of the current model BIT, taking into account India’s negotiating experience and international practices.

The existing framework, introduced in 2015, requires foreign investors to pursue domestic legal remedies for up to five years before initiating international arbitration. The provision was introduced after disputes, including tax-related cases, reached international arbitration.

The restrictive conditions subsequently made it difficult for India to conclude several investment treaties. Officials have indicated that the mandatory domestic litigation period could potentially be reduced to two years under the revised framework.

The review comes as attracting overseas capital becomes a greater policy priority. India recently permitted 100% foreign ownership in inventory-based e-commerce businesses focused exclusively on exports. The government is also working on tax incentives for foreign companies supporting domestic electronics manufacturing.

New BIT Framework May Boost Global Investment Ties

Thakur said the revised model would also consider the interests of Indian companies investing overseas. She noted that while some existing provisions may require changes, others could remain useful for protecting Indian businesses and investors abroad.

The updated framework is expected to support India’s ongoing efforts to negotiate investment agreements with major developed economies, including the UK and the European Union.

Trade policy expert Ajay Srivastava, founder of the Global Trade Research Initiative, said India needs to align its investment treaties with international practices as it seeks to become the world’s third-largest economy.

He also stressed the need to address concerns created by the cancellation of several earlier investment treaties and improve India’s negotiating approach.

The revised BIT template is therefore expected to balance stronger investor protection with India’s regulatory interests while creating a framework that can attract greater long-term foreign investment.