We have a model investment treaty. And are losing billions because of it

India's persistent obstructionism in the realm of economic policies has led to significant losses, despite having the power to enact the right policies. The Model Bilateral Investment Treaty (BIT) of 2016 remains the most obstructionist investment treaty in the world, causing delays and setbacks for foreign investors. Before international arbitration, a foreign investor had to litigate in Indian courts for five years, which was significantly longer than the consultation period typically requested by other nations, ranging from three to six months.

In contrast, the revised BITs since 2016, like those with the UAE in 2024 and Israel in 2025, reduced the holding period to three years, still six times longer than the norm.

The delay in revising the 2016 Model BIT has resulted in negative consequences for India's foreign direct investment (FDI) network. Since 2015, FDI networks have been dismantled, leading to a decline in the number of treaties in force, falling from 73 to just eight by 2021. Even though 2025-26 recorded a record FDI inflow of $94.5 billion, the net FDI was a mere $7.65 billion, which is the second-lowest in three decades, amounting to just 0.18 percent of GDP.

On top of that, reinvested earnings of foreign firms were $25.6 billion, outperforming net FDI, revealing a negative trend.

Foreign investors are withdrawing from India at an alarming rate, with an additional $10.5 billion leaving the country in the first eight months of 2025 alone. Foreigners withdrew $17.7 billion in 2025, a stark contrast to the performance of other emerging markets, which have seen significant inflows. The trend is alarming, and India's decision to reject the right policies has led to a net loss for the country.

It is crucial to question whether the current narrative of India being an attractive destination for foreign investment holds water, or if the logic of retaining outdated policies is the real culprit.