India Considers Changes to Bilateral Investment Treaties to Enhance Investor Appeal

India Reviews Bilateral Investment Treaty Framework Amid Global Uncertainty

India is considering changes to its bilateral investment treaty (BIT) framework as it seeks to attract greater foreign capital amid heightened global uncertainty and the ongoing West Asia crisis, according to officials familiar with the matter. As reported by the Economic Times, the government is reviewing its current framework to ensure it remains competitive in a rapidly changing global landscape.

One of the key proposals under review is easing the requirement that foreign investors exhaust domestic legal remedies before seeking international arbitration. Under India's 2016 BIT model, investors must wait five years before initiating global dispute resolution proceedings. However, India reduced this period to three years in its 2024 investment agreement with the UAE, signalling a more flexible approach.

The government is also evaluating whether to extend the most-favoured nation (MFN) forward clause in future treaties. Such a provision would automatically grant existing treaty partners any investment-related concessions offered to new partners. Officials have emphasized that any relaxation of treaty terms would be accompanied by safeguards to prevent misuse.

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Policymakers remain committed to protecting India's sovereign policy-making space and preventing "treaty shopping", a practice through which investors route investments via third countries to gain favourable treaty benefits. The review comes as India pursues investment treaties with more than two dozen countries and regional blocs, including the EU, the US, Russia, Saudi Arabia, Qatar, and Oman.

India's gross foreign direct investment inflows reached a record $94.5 billion in FY26, while total FDI had previously fallen from $85 billion in FY22 before recovering to over $80 billion in FY25. Concerns over capital outflows and intensifying global competition for investment, particularly in artificial intelligence and strategic technologies, have prompted a fresh look at the 2016 BIT model.