India’s Initiative to Revamp the 2015 Model Bilateral Investment Treaty
In the Union Budget 2025, Finance Minister Nirmala Sitharaman announced that the government would revisit the Model BIT adopted in 2015. The revised draft is expected to be placed before the Union Cabinet soon.
Key Developments
- India will shift the balance of the treaty more towards investment protection while retaining the right to regulate.
- Proposed reforms include easier access to international arbitration for investors and stronger investment facilitation.
- Government is urged to adopt a transparent, multi‑stage consultative process to avoid a ‘democratic deficit’ criticism.
Important Facts
Since 2015, India has concluded only a few BITs based on the old model, reflecting its limited appeal to capital‑exporting nations. The original model was drafted after several foreign investors sued India for alleged treaty breaches, prompting a unilateral termination of existing BITs and the creation of a new template.
The LCI examined the 2015 draft, issued its 260th report with recommendations, and the government incorporated many but not all of these suggestions before adopting the final version in December 2015.
Exam Relevance
Understanding the Model BIT is essential for GS‑3 (Economy) as it deals with foreign investment, trade policy, and dispute‑resolution mechanisms. The debate on democratic deficit links to GS‑2 (Polity) topics on parliamentary oversight, treaty‑making procedures, and stakeholder participation. The role of the LCI and the need for public consultation illustrate the functioning of India’s legislative‑executive interface.
Way Forward
To ensure a robust and balanced treaty, the government should:
- Form a core team of external experts in international investment law and economics.
- Invite inputs from industry bodies, arbitrators, law firms, and civil‑society organisations.
- Publish the draft for public comment, replicating the 2015 consultation exercise.
- Place the draft before Parliament and relevant parliamentary committees for debate, ensuring that the process is substantive rather than a mere formality.
Such a participatory approach will strengthen India’s credibility in attracting foreign capital while safeguarding the state’s regulatory space.