India considers easing bilateral investment rules to attract more investors
What's the story
In a bid to attract more foreign investment, the Indian government is considering changes to its bilateral investment treaty (BIT) framework. The move comes in light of global uncertainties and the ongoing West Asia crisis. According to The Economic Times, one of the major proposals under consideration is relaxing the requirement for foreign investors to exhaust domestic legal remedies before seeking international arbitration.
Flexibility
Changes in BIT model
Under India's 2016 BIT model, investors had to wait five years before initiating global dispute resolution proceedings. However, this period was reduced to three years in the country's 2024 investment agreement with the UAE. The government is also considering whether to extend the most-favored nation (MFN) forward clause in future treaties. This clause would automatically extend any investment-related concessions given to new partners by India under a bilateral treaty, ET reported.
Protection measures
Safeguards to prevent misuse
Officials have told ET that any relaxation of treaty terms will be accompanied by safeguards to prevent misuse. The government is committed to protecting India's sovereign policy-making space and preventing "treaty shopping," a practice where investors route investments through third countries for favorable treaty benefits. A decision on these issues will be taken after broader consultations, the officials said.
Global outreach
Broader consultations needed for decision-making
The review comes as India seeks investment treaties with more than two dozen countries and regional blocs, including the EU, the US, Russia, Saudi Arabia, Qatar and Oman. Concerns over capital outflows and intensifying global competition for investments in artificial intelligence (AI) and strategic technologies have prompted this fresh look at the 2016 BIT model.
Investment surge
Record FDI inflows in FY26
India's gross foreign direct investment (FDI) inflows hit a record $94.5 billion in FY26. The total FDI had fallen from $85 billion in FY22 but recovered to over $80 billion in FY25, ET reported. The government is also planning to abolish the capital gains tax on investments in government securities by foreign portfolio investors as part of its efforts to attract more foreign capital.