Nageswaran also said that foreign investment play crucial role in the economic growth and development, and "we are a current account deficit (CAD) country, so we need both portfolio and direct investments".
Chief Economic Adviser V Anantha Nageswaran on Tuesday said the new model text for bilateral investment treaty (BIT) will be better aligned to the demands of a dynamic global investment environment, while safeguarding India's sovereign rights and regulatory space.
Addressing a post Budget webinar 2025 on the theme of 'Making India Investment Friendly', he said the BIT framework is being revised to reflect modern challenges.
Almost 10 years have passed since the last review of India's model BIT and since then, the global investment ecosystem and international jurisprudence have evolved significantly, he said.
Nageswaran said investors now seek stronger protection for their investments, especially in emerging economies, and this has necessitated an update of the model BIT to align it with international norms, while ensuring that the country remains an attractive investment destination, especially for medium enterprises.
"The new model BIT therefore will be more attuned to the demands of a dynamic global investment environment. At the same time, we will reflect India's sovereign rights and the importance of regulatory space so that public policy priorities are not constrained by international legal obligations," Nageswaran said.
Finance Minister Nirmala Sitharaman in her 2025-26 Budget speech said that to encourage sustained foreign investment and in the spirit of 'first develop India', the current model BIT will be revamped and made more investor-friendly.
The announcement assumes significance as only a few countries have accepted the existing model tax treaty, and most of the developed nations have expressed their reservations on the tax with regard to provisions like resolution of disputes.
Nageswaran also said that foreign investment plays a crucial role in the economic growth and development, and "we are a current account deficit (CAD) country, so we need both portfolio and direct investments".
The bilateral investment treaties provide a legal framework to protect foreign investments, especially for small and medium enterprises, while offering safeguards like protection against expropriation and fair treatment.
Last month, Sitharaman had said that going forward the bilateral investment treaties should capture national interest in relation to regulatory powers and strengthen the guidance for arbitrators in resolving disputes.
She said the issues related to BIT are unique to the sovereign and hence BIT should be negotiated on a standalone basis rather than as a part of an FTA agreement.
India signed its first BIT with the United Kingdom in 1994 and most recently, two more bilateral investment treaties in 2024 with UAE and Uzbekistan.
"Initially, the BITs were focused on investor protection. Over time, many countries, including India, have realized the importance of balancing investor protection with state sovereignty. The goal is to safeguard national interest while encouraging foreign investment," he said adding "it is a balancing act".
Presently, India is negotiating a BIT with the UK, Saudi Arabia, Qatar, and the European Union (EU).
FDI inflows into India have crossed the USD 1 trillion milestone in the April 2000-September 2024 period, firmly establishing the country's reputation as a safe and key investment destination globally.
Foreign investments are increasing in the country. The inflows are increasing in sectors such as services sector, computer, software and hardware, trading, telecommunications, automobiles and they have contributed significantly to competitiveness and technology advancement in the country.