India’s FDI treaties fell from 73 to 8: What happened after the 2016 Model BIT?
India’s investment treaty network fell from 73 treaties in force in 2015 to eight by 2021, economist Surjit Bhalla has highlighted while calling for a rethink of the 2016 Model BIT. Bhalla argues that provisions such as the five-year litigation requirement may have weakened India’s appeal for fresh foreign investment.
- Oct 2, 2026,
- Updated Oct 2, 2026 4:04 PM IST
India’s investment treaty network shrank sharply after the introduction of its 2016 Model Bilateral Investment Treaty (BIT), with treaties in force falling from 73 in 2015 to just eight by 2021, according to economist Surjit Bhalla. The former adviser to Prime Minister Narendra Modi has argued that the framework became a constraint on foreign investment and is now due for a rethink.
Bhalla said on X that the government is “expected to finally!” revise the Model Investment Treaty. In a column in The Indian Express, he questioned the delay, noting that Finance Minister Nirmala Sitharaman had said 18 months ago that the 2016 Model BIT would be revised.
Five-year litigation requirement
A key point of Bhalla’s criticism is the 2016 Model BIT’s requirement that foreign investors pursue domestic legal remedies for five years before initiating international arbitration.
“Before going to international arbitration, a foreign investor had to litigate in Indian courts for five years,” Bhalla wrote. He contrasted this with the three-to-six-month consultation periods typically followed internationally, during which parties attempt to resolve disputes before arbitration.
“India asked for 10 times that, in a judicial system where five years does not produce a judgment anyway,” he said.
Bhalla argued that the provision did not necessarily improve dispute resolution but instead created prolonged uncertainty for investors. India’s subsequent investment treaties with the UAE in 2024 and Israel in 2025 reduced the requirement to three years, although Bhalla said this remains significantly longer than the international norm.
Treaty network contracts
Bhalla highlighted the sharp contraction in India’s investment treaty network following the 2016 framework. According to figures cited in his column, treaties in force declined from 73 in 2015 to 29 in 2017, 16 in 2019 and eight by 2021, where the number remained for another four years.
“India has been the most obstructionist member of the WTO. With the ‘Model’ BIT, it went on to construct the most obstructionist investment treaty in the world,” Bhalla wrote.
He argued that the decline in treaties needs to be viewed alongside India’s broader foreign investment figures, rather than relying solely on headline gross FDI numbers.
Gross FDI versus net investment
India recorded gross FDI inflows of $94.5 billion in 2025-26, according to figures cited by Bhalla. However, foreign investors repatriated or disinvested $53.6 billion, while Indian companies invested $33.3 billion abroad, leaving net FDI at $7.65 billion, he said.
Bhalla also pointed to $25.6 billion in reinvested earnings by foreign companies. He argued that retained profits should not automatically be viewed as fresh commitments of foreign capital.
“The cost of what we did is not what we lost. It is what we have been forgoing, year after year,” Bhalla wrote.
The debate over the Model BIT comes as India seeks to attract greater foreign investment while negotiating trade and investment arrangements with major economies. Bhalla’s central argument is that policymakers should focus not only on capital already entering India but also on investment that could potentially come under a more predictable treaty framework.
“We know, and have known, what the right policy is to follow. Yet, we don’t allow the right policy to happen,” he wrote.
India’s investment treaty network shrank sharply after the introduction of its 2016 Model Bilateral Investment Treaty (BIT), with treaties in force falling from 73 in 2015 to just eight by 2021, according to economist Surjit Bhalla. The former adviser to Prime Minister Narendra Modi has argued that the framework became a constraint on foreign investment and is now due for a rethink.
Bhalla said on X that the government is “expected to finally!” revise the Model Investment Treaty. In a column in The Indian Express, he questioned the delay, noting that Finance Minister Nirmala Sitharaman had said 18 months ago that the 2016 Model BIT would be revised.
Five-year litigation requirement
A key point of Bhalla’s criticism is the 2016 Model BIT’s requirement that foreign investors pursue domestic legal remedies for five years before initiating international arbitration.
“Before going to international arbitration, a foreign investor had to litigate in Indian courts for five years,” Bhalla wrote. He contrasted this with the three-to-six-month consultation periods typically followed internationally, during which parties attempt to resolve disputes before arbitration.
“India asked for 10 times that, in a judicial system where five years does not produce a judgment anyway,” he said.
Bhalla argued that the provision did not necessarily improve dispute resolution but instead created prolonged uncertainty for investors. India’s subsequent investment treaties with the UAE in 2024 and Israel in 2025 reduced the requirement to three years, although Bhalla said this remains significantly longer than the international norm.
Treaty network contracts
Bhalla highlighted the sharp contraction in India’s investment treaty network following the 2016 framework. According to figures cited in his column, treaties in force declined from 73 in 2015 to 29 in 2017, 16 in 2019 and eight by 2021, where the number remained for another four years.
“India has been the most obstructionist member of the WTO. With the ‘Model’ BIT, it went on to construct the most obstructionist investment treaty in the world,” Bhalla wrote.
He argued that the decline in treaties needs to be viewed alongside India’s broader foreign investment figures, rather than relying solely on headline gross FDI numbers.
Gross FDI versus net investment
India recorded gross FDI inflows of $94.5 billion in 2025-26, according to figures cited by Bhalla. However, foreign investors repatriated or disinvested $53.6 billion, while Indian companies invested $33.3 billion abroad, leaving net FDI at $7.65 billion, he said.
Bhalla also pointed to $25.6 billion in reinvested earnings by foreign companies. He argued that retained profits should not automatically be viewed as fresh commitments of foreign capital.
“The cost of what we did is not what we lost. It is what we have been forgoing, year after year,” Bhalla wrote.
The debate over the Model BIT comes as India seeks to attract greater foreign investment while negotiating trade and investment arrangements with major economies. Bhalla’s central argument is that policymakers should focus not only on capital already entering India but also on investment that could potentially come under a more predictable treaty framework.
“We know, and have known, what the right policy is to follow. Yet, we don’t allow the right policy to happen,” he wrote.