Checks In Place, In Next Batch Only One Firm With Member Stake: Govt, Pg1

Key Highlights:

• The Indian government is reviewing its Model Bilateral Investment Treaty (BIT), with a revised version expected to be presented to the Cabinet soon.
• A key aspect of the review is to protect the rising Overseas Direct Investment (ODI) by Indian companies, which is considered a new dimension in negotiations.
• India's net Foreign Direct Investment (FDI) has significantly declined in recent years, contributing to a weakening of the Balance of Payments (BoP) and the rupee.
• The five-year local remedies clause in the 2015 Model BIT, which mandates exhausting domestic legal options before international arbitration, is under consideration for a reduced timeline, possibly to a minimum of two years.

Detailed Insights:

• The Economic Affairs Secretary emphasized that protecting Indian investors abroad is crucial as Indian companies expand their global footprint.
• The 2015 Model BIT was adopted following a surge in international arbitration demands against India, aiming to balance investor protection with state regulatory independence.
• Critics have cited the five-year local remedies clause as a hurdle for foreign investors, making India less attractive for FDI.
• Net FDI inflows into India slumped from nearly $44 billion in 2020-21 to less than $1 billion in 2024-25, recovering slightly to $7 billion in 2025-26.
• This decline is partly due to foreign investors repatriating over $105 billion combined in 2024-25 and 2025-26, alongside increased ODI by Indian firms.
• Indian companies' ODI has risen sharply from $11 billion in 2020-21 to $34 billion in 2025-26, reflecting the growing maturity of the Indian private sector.
• The government is reviewing various clauses in the Model BIT to make it more investor-friendly and align with global best practices.

Key Concepts Involved:

• Bilateral Investment Treaty (BIT): An agreement between two countries to promote and protect investments made by their investors in each other's territories.
• Overseas Direct Investment (ODI): Investment made by a company or individual in one country into a company or asset in another country.
• Foreign Direct Investment (FDI): An investment made by a firm or individual in one country into business interests located in another country.
• Balance of Payments (BoP): A statement of all transactions made between entities in one country and the rest of the world over a specified period.
• Local Remedies Clause: A provision in an investment treaty requiring investors to exhaust domestic legal options before initiating international arbitration.