Foreign Direct Investment (FDI) inflow into the country in the 2014-23 period doubled to $596 billion, compared to the inflows in 2005-13, while the focus of the bilateral investment treaties being negotiated with foreign partners is now on `first develop India’, Finance Minister Nirmala Sitharaman pointed in her Budget speech for 2024-25.

The play on the acronym for FDI, which the FM says also stands for `first develop India’, is important as the country is in the midst of intense negotiations on BITs with a number of trade partners, specifically the UK and the EU.

“The FDI inflow during 2014-23 was $596 billion marking a golden era. That is twice the inflow during 2005-14,” Sitharaman said.

FDI inflow in India stood at $36 billion in 2013-14 and registered its highest ever annual FDI inflow of $85 billion in 2021-22, per figures collated by the Department for Promotion of Industry and Internal Trade (DPIIT). “During 2022-23, FDI inflow of $71 billion (provisional figure) has been reported. During the current financial year 2023-24 (up to September 2023), FDI worth $33 billion has been reported,” the DPIIT year-end note pointed out.

The FM said that the government was trying to ensure that the foreign investment flow continued through BITs that focussed on the country’s development interest.

“For encouraging sustained foreign investment, we are negotiating bilateral investment treaties with our foreign partners, in the spirit of ‘first develop India,” Sitharaman said.

Both the UK and the EU want India to make concessions in the investor state dispute settlement provisions that have been proposed in the model BIT framed by the Finance Ministry when it terminated most of the earlier BITs it had with other countries in 2016. While India wants to have the `exhaustion of local remedies’ clause in the treaty that would ensure that all options of dispute settlement are opted for within the country before going in for international arbitration, the UK and the EU are not comfortable with it.

“India is renegotiating with 37 countries using the restrictive 2016 Model BIT, which may lead to protracted negotiations due to its narrow ‘investment’ definition, vague terms, omission of principles like ‘fair and equitable treatment’, and Most-Favored Nation status. ..As India aims to become the third-largest economy, it needs to align its treaties with global investment practices, address the negative perception caused by the mass treaty cancellations, and reflect on its negotiation skills. The new agreements should ideally resolve these concerns,” said Ajay Srivastava from the Global Trade Research Initiative.