India's BIT Reset: Make India an attractive investment destination

India as an investment destination The Model Bilateral Investment Treaty (BIT) is now being reconsidered. The exercise comes at an opportune moment as the country gears up to ramp up private investment levels required to meet its goal of Viksit Bharat or a high income economy by 2047. That would require a GDP growth rate of minimum 8%, and an investment level of at least 40% of GDP. Our highest savings to GDP ratio was 35%. The Savings-Investment gap, also reflected in our structural current account deficit can only be covered only by attracting higher volumes foreign direct investment (FDI). India received $95.4 billion in FDI in 2025, which is a mere 6% of global FDI flows of $1.6 trillion. There is universal agreement this inflow is far lower than India's true potential. Therefore, the BIT reset will do well to have a clear, unequivocal goal of making India an attractive destination for foreign investors. BIT Reset Must Begin With India's Investment Imperative Asian economies which broke through the middle income trap relied heavily on raising the share of FDI in their investment. India's ten-year average net FDI-to-GDP ratio of 1.5 percent compares with 1.9 percent for Thailand and 1.7 percent for Indonesia. Vietnam's ratio was 4.2 percent in 2024, almost four times India's. Even China, with its significantly higher savings rate, averaged FDI to GDP ratio of about 2.35% during its high growth decades. A BIT governs the exceptional moment when the relationship between an investor and the State or between two former corporate partners breaks down. A revamped BIT may be a necessary condition for attracting substantially greater FDI. However, it is emphatically not a sufficient one. A Better BIT Is Necessary The larger significance of the reset is therefore competitive. Global capital has choices, and investors compare not only returns but also the predictability of the institutions around them. India's BIT architecture should signal that the country is confident enough in its regulatory institutions to offer investors clear protections while retaining the legitimate policy space of the State. The objective should be to make India's legal and institutional framework an advantage in the competition for long-term capital, rather than a risk investors price into their decisions. A treaty can offer an investor protection when the relationship with the State goes awry. It cannot, by itself, determine whether obtaining an approval takes months, whether a contract will be enforced in reasonable time, or tax interpretation will always be prospective and predictable, or whether a regulatory decision will be transparent and consistently applied across all categories of investors. Ease of Doing Business Must Go Beyond Approvals India's first task, therefore, is to focus laser like and complete the deeper work of ease of doing business . The objective should be to reduce the transaction costs created by institutional friction and have the same rules for all categories of investors. Second, for foreign investors, there should be the provision of single point engagement with the government for understanding the investor's complaint or pain-point and addressing it within a stipulated time period. The BIT may identify a specific desk/committee/authority within the Central and State governments that will be empowered to do this across ministries and agencies. Only if the complaint cannot be addressed would the issue be raised as a legal dispute, for which the BIT can lay down the process, that must necessarily be the same for all our partner countries. The third is prospectivity . Capital is deployed based on assumptions about the future. Retrospective legislation, regulation or administrative interpretation can destroy those assumptions to long-term negative effects. Therefore, the revamped BIT should explicitly rule out retrospective measures across all dimensions.. The fourth is commercial capacity within the justice system . A commercial right delayed is a commercial right diminished. India needs courts that combine speed with commercial intelligence. Predictability, Prospectivity and Regulatory Equality The fifth is regulatory equality and predictability . A serious investment destination cannot operate through opaque exceptions or differential treatment. The investment decision framework must be transparent and non-discriminatory for all capital irrespective of the country of origin. , Investors need to be sure that comparable investments will be treated comparably. Any exceptions, on grounds of national security will be intelligible and transparent. The UAE and Israel BITs show the direction. Both retain the enterprise-based approach but permit standalone equity and debt and include portfolio investment. Both reduce the local-remedy requirement to three years. Both retain a narrower form of protection against manifest arbitrariness while excluding legitimate expectations. The proposed BIT may simply expand the coverage of BITs with the UAE and Israel to all other partner countries. While a MFN approach is simpler to administer and fairer in perception, the government could always consider including specific provisions to satisfy potentially large FDI source country. Another simple and less time-consuming approach would be look at BIT models of countries, like China, Vietnam, Korea etc, which have been successful in attracting FDI. The new BIT could simply adopt any of these models with necessary adaptations for Indian features. BIT Reset Beginning of an Investment-Promoting State Given our stage of development and critical requirement of foreign capital, frontier technologies and access to large markets, the government should try and qualitatively improve the governance framework and make it more private investor friendly, for both foreign and domestic investors. We need the FDI. Therefore, the new BIT should make it clear that the government will follow a phased approach. Negotiate first; next raise a legal dispute to be resolved in Indian courts in a short timeframe and finally, if still necessary, proceed for international arbitration, on terms that are broadly neutral. India needs an investment-promoting state in which the BIT, the tax system, regulators and courts speak the same language: predictability, non-discrimination and transparency . The BIT reset should be the beginning of that alignment, not its substitute. (Rajiv Kumar is the Chairman of the Pahlé India Foundation and former Vice Chairman of NITI Aayog.) (Srinath Sridharan is Author, Policy Researcher & Corporate Advisor, Twitter: @ssmumbai.) Views are personal, and do not represent the stand of this publication.