The Indian government is mulling a comprehensive revision of its decade-old model bilateral investment treaty, aiming to create a more balanced and investor-friendly framework amidst increasing foreign investment and evolving economic priorities.
India is close to overhauling its decade-old model bilateral investment treaty, with the revised text likely to go before the Union Cabinet soon, according to Department of Economic Affairs secretary Anuradha Thakur. Speaking in New Delhi at the National Council of Applied Economic Research’s India Policy Forum, Thakur said the government was reviewing the treaty framework more broadly than just the dispute settlement clause, as it seeks a balance between a more welcoming regime for investors and safeguards for the state.
The rethink matters because India’s current template, put in place about 10 years ago, has been seen as too demanding for foreign investors. Under the existing system, they must typically pursue domestic legal remedies for as long as five years before moving to international arbitration. That has already been eased in newer treaties with the United Arab Emirates and Israel, which reduced the domestic litigation period to three years, and officials are now weighing whether to extend that approach more widely.
Thakur said the review was also meant to reflect the fact that Indian companies have become significant overseas investors in their own right. In her view, the protection debate is no longer only about bringing capital into India but also about shielding Indian firms abroad. Business Standard reported that the revised model could help Delhi conclude long-running investment treaty talks with the United Kingdom and the European Union, both of which have recently advanced wider trade agreements with India.
The broader policy backdrop is one of a government trying to keep investment and reform momentum going at a time Thakur described as unusually unsettled. She said private-sector spending on research and development still accounts for only 41% of India’s gross R&D outlay, well below the 75% to 79% seen in advanced economies. She also pointed to a revival in public-private partnerships and a steady rise in private investment, helped by strong public capital spending and a post-pandemic push from the Centre, which has almost tripled capital expenditure over the past five years.
At the same event, Sixteenth Finance Commission chairman Arvind Panagariya argued that the next big reform push will have to come from the states, especially on urban land. He said India’s urbanisation level, at about 35% of the population, remains too low for a country seeking faster growth, and urged state governments to loosen building rules, soften zoning restrictions and put idle land to productive use.
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