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The new model text for bilateral investment treaty (BIT) being formulated will be better aligned to the demands of a dynamic global investment environment while safeguarding for India’s sovereign rights and regulatory space, chief economic adviser V Anantha Nageswaran on Tuesday said
Addressing a post-budget webinar, Nageswaran said global investment ecosystem and international jurisprudence have evolved significantly since the last review of India’s BIT almost 10 years ago.
Nageswaran said investors now seek stronger protection for their investments, especially in emerging economies.
“The new model BIT therefore will be more attuned to the demands of a dynamic global investment environment. At the same time, we will reflect India’s sovereign rights and the importance of regulatory space so that public policy priorities are not constrained by international legal obligations,” he said.
In the Budget speech on February 1, finance minister Nirmala Sitharaman said that to encourage sustained foreign investment and in the spirit of ‘first develop India’, the current model BIT will be revamped and made more investor-friendly.
The announcement came at a time when few countries have accepted the existing model tax treaty, and most of the developed nations have expressed their reservations on the tax with regard to provisions like resolution of disputes locally.
The bilateral investment treaties provide a legal framework to protect foreign investments, especially for small and medium enterprises, while offering safeguards like protection against expropriation and fair treatment.
Recently, Sitharaman said the issues related to BIT are unique to the sovereign and hence BIT should be negotiated on a standalone basis rather than as a part of an FTA agreement.
Most recently, two more bilateral investment treaties in 2024 with UAE and Uzbekistan.
Currently, India is negotiating a BIT with the UK, Saudi Arabia, Qatar, and the European Union (EU) among others.
Nageswaran also said that India should have a modern, responsive regulatory framework to create a growth-conducive investment climate to attract more foreign direct investment (FDI).
“We need to focus on improving regulatory clarity, easing business operation and making sure that plumbing of regulatory framework corresponds with broader vision (of reforms),” he said.
Nageswaran said it is very clear that growth will come under pressure across the world considering the actions taken by various governments over the past one month.
He said India has to do whatever it can domestically to sustain the “mood of constructive optimism” within the country.
He said a robust investment climate is necessary, particularly when global FDI flows are likely to be affected due to rising global risk aversion.
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