Home   »   Daily Current Affairs For UPSC 2025   »   Bilateral Investment Treaties

Editorial of the Day (10th Feb): Bilateral Investment Treaties

Context: Finance Minister Nirmala  Sitharaman announced plans to negotiate Bilateral Investment Treaties with trade partners to attract more foreign direct investment.

Bilateral Investment Treaties: An Overview

  • Definition: BITs are international agreements between two countries to promote and protect mutual investments.
  • India’s BIT History: Initiated in the mid-1990s to attract foreign investments with treaty-based protections.
  • First BIT: India’s first BIT was signed with the UK in 1994.

India’s BIT Challenges and Reforms:

  • Adverse Legal Outcomes: Faced with costly legal disputes, including a significant case against Cairn Energy.
  • 2016 BIT Model: Introduced as a response to financial burdens from legal claims, the model was viewed as protectionist.
  • Criticism: The 2016 model lacked key international law principles and mandated exhausting local legal remedies before arbitration.
  • Termination and Renegotiation: India terminated 68 out of 74 BITs with the intent to renegotiate under the new model.

Impact on Foreign Direct Investment (FDI):

  • FDI Decline: Notable decrease in FDI equity inflows recorded in April-September 2023.
  • Negotiation Difficulties: India has struggled to renegotiate BITs under the stringent 2016 model, affecting FDI.

Steps Towards Progressive BITs:

  • FTA Negotiations: India is negotiating an FTA with the UK, potentially omitting the requirement to exhaust local remedies.
  • Parliamentary Recommendations: In 2021, suggestions were made for timely dispute settlements and building local arbitration expertise.
  • Ease of Enforcement: India’s low ranking in contract enforcement highlights the need for BIT regime improvements.

We’re now on WhatsAppClick to Join 

Future Outlook:

  • $5-Trillion Economy Goal: Progressive BITs are crucial for achieving India’s economic ambitions.
  • Government Approach: Current efforts show a positive trend, but a tailored strategy is necessary for sustainable cross-border growth.
  • Recommendations Implementation: Critical for improving India’s investment climate and ensuring robust trade and investment stability.

Sharing is caring!

About the Author

Sakshi Gupta is a content writer to empower students aiming for UPSC, PSC, and other competitive exams. Her objective is to provide clear, concise, and informative content that caters to your exam preparation needs. She has over five years of work experience in Ed-tech sector. She strive to make her content not only informative but also engaging, keeping you motivated throughout your journey!