India is reviewing its model Bilateral Investment Treaty to better protect its companies investing overseas, marking a significant shift from traditional focus on attracting foreign investment to safeguarding outbound capital amid rising Indian overseas investments.
India is reviewing its model Bilateral Investment Treaty as officials confront a newer reality: protection for Indian companies investing overseas now matters as much as safeguards for foreign investors coming in. Anuradha Thakur, the Economic Affairs Secretary, said the issue was becoming an “entirely new dimension” in treaty talks and indicated the revised framework would soon go before the Cabinet for approval.
Speaking at the National Council of Applied Economic Research’s India Policy Forum in New Delhi on Friday, Thakur said the government had to think about outbound capital as well as inbound money when drafting investment rules. That marks a notable shift from the traditional focus of such treaties, which have generally been designed to encourage foreign direct investment by offering legal protection and access to arbitration.
The review comes against the backdrop of a sharp deterioration in India’s net FDI position. While gross inflows have risen, foreign investors have also stepped up profit repatriation and Indian companies have expanded their overseas investments. According to the figures cited in the report, net FDI fell from almost $44 billion in 2020-21 to less than $1 billion in 2024-25 before recovering slightly, while outbound investment by Indian firms climbed from $11 billion to $34 billion over the same broad period. Economists have said this reflects a global shift towards localising supply chains, forcing Indian companies to invest abroad if they want access to some markets.
One of the most contested issues in the current model treaty is the requirement that foreign investors must exhaust domestic legal remedies for five years before seeking international arbitration. Critics have long argued that the clause makes India a harder jurisdiction in which to invest. But Thakur made clear that the government is not limiting itself to that single provision. She said the framework is “open right now” and that officials are examining a range of clauses, including the possibility of setting out a negative list of provisions to be retained or excluded.
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