India tweaking BIT model to suit bilateral needs: FM Nirmala Sitharaman

India has moved beyond its 2016 Model BIT, adopting a more flexible and transparent approach to investment treaties, Finance Minister Nirmala Sitharaman said

India has gone beyond its 2016 template of “bilateral investment treaty” (BIT) and has become “a lot more progressive” in negotiating agreements on investment protection, Union Finance Minister Nirmala Sitharaman said, emphasising that India now tweaked the template wherever bilateral requirements demand it.

 

Speaking at the Business Standard Manthan summit, Sitharaman said that while India still pegged itself to the 2016 model, such adjustments were made transparently, backed by full Cabinet approval, thus enabling India to conclude investment treaties with the United Arab Emirates, Saudi Arabia, and potentially Oman. 

The minister said BITs today were no longer the decisive factor they once were. She pointed out that several countries invested in India without demanding a BIT, while Indian firms were also investing abroad without any such treaty. “Countries have prospered with investments coming in despite not having a BIT. So I cannot rush to say ‘BITs with everyone’, nor can I say ‘no BIT at all’. The world is a lot more dynamic today.” 

 

Sitharaman emphasised that India’s experience with past treaty disputes continued to inform the government’s position. Instances where foreign investors invoked treaty arbitration on taxation matters, or bypassed the Indian judicial system despite pending Supreme Court-level remedies remained critical concerns.

 

“There are many such elements which become deal-breakers,” she added.

 

On whether India should revisit Press Note 3, which tightened scrutiny on investment from countries sharing land borders with India, especially Chinese inflows, Sitharaman said the concerns around ultimate beneficial ownership were not specific to China but applied to all jurisdictions.

 

“I will be concerned about the ultimate beneficial owner for several non-commercial reasons. It can be what kind of money is coming … I’m not specifically talking about China. I am worried about investment from these points of view even otherwise,” she said, adding that such money should be compliant with the Foreign Exchange Management Act (Fema) and Financial Action Task Force (FATF).

 

“Although it (foreign direct investment) comes through the automatic route, at some point in time you start thinking, once the shareholding increases, who is investing? Is it going to be just one block which is going to hold the company? ... Companies who are under distress, not for any individual reason but for reasons beyond us, cannot be taken away,” she added.

 

The minister also referred to emerging concerns around foreign buyers bidding digitally for coffee estates in Karnataka. “Maybe nothing is wrong. But these are unique Indian assets. There are a lot of questions on which we need to pause and then move forward,” she said.

 

On tepid net foreign direct investment, Sitharaman said: “Beyond what we can provide (such as) policy stability and tax stability there are forces governing the movement of global capital. So we have to wait to see the uncertain times playing out.”

 

Sitharaman highlighted global uncertainties as the biggest policy challenge. “Uncertainty level A in the morning, uncertainty level B in the afternoon. If I answer about tariff rates now, I’ll be outdated by the evening.”

 

While the government tries to keep all ammunition ready to address the situation, the minister said “you end up firefighting”.

 

Domestically, she cited the monsoon as a perennial risk. “I want this forthcoming monsoon to be good to us — kind to us —   no ati vristi (excessive rainfall), no ana vristi (deficient rainfall).”

 

On farm-sector reforms, Sitharaman highlighted initiatives such as the Agriculture Stack. “The AgriStack is a fantastic experiment. I would think the next United Payments Interface-like big revolution shall emerge from AgriStack. Now we’ll be able to have a clear picture of how much fertiliser is required. There will be no shortage and no denying of fertiliser to the farmer but yet (we will know) how much is going into the soil and how much is going into something else.”

 

On banking reform, Sitharaman explained the purpose of the new committee announced in the Budget. “I want the output to be workable, doable, and actionable. I don’t want a committee which is going to come out (with something) that is exhaustive, fantastic but on which I can do nothing,” she said, adding that the terms of reference for the committee will be out soon.

 

The minister said this was the best time for such a committee on banking-sector reforms because Indian banks were in a strong position, after coming remarkably out of the twin balance-sheet problems. “There can’t be a better time than this to talk about what is next the Indian banks, especially if you are looking at 2047 and want to be a developed country. Are our banks positioned to fund all that and keep the economy on an even keel,” she added.  

 

On the ongoing Customs reforms, Sitharaman said while the goal was to remove the sphere of tariff wall, the country’s industry could not be harmed in the process. “These reforms can’t be at one stroke. It has to be item by item. We spend a lot of time debating where it should come down, by what extent it should come down. Some goods seem to be given protection for 20-30 years. If you’ve not made a mark, well, open it up. Let people get the imports,” she asserted.

 

On the ₹70,000 crore lying unspent in about 50 schemes in state-level single nodal agency (SNA) accounts, the minister linked the issue to political incentives. “In some reform-related steps — not even one taker. In some, a few takers. In some others, everybody is in. It depends on the way in which the parties ruling in the states are able to project that as a reform which will not hurt anybody. A political narrative for taking up a reform determines whether they want this money or not. Similarly, in some of the schemes if they don’t think they get political mileage out of it, they don’t want that money,” she added.

 

However, she cited the recent pre-Budget consultation with state finance ministers as “purposeful”, noting that the idea of rare earth industrial corridors emerged directly from this meeting.

 

On the policy on public-sector enterprises in 2021, Sitharaman said progress should not be viewed only through the lens of privatisation or disinvestment. She cited the opening up of the space and atomic-energy sectors to private players. On slow movement in big-ticket disinvestment, she said: “This will also happen. But this depends on so many different things — the market situation … whether it’s going to be strategic divestment or completely selloff. In government everything consumes time for even to let go something that you have decided to let go.”

 

On the tepid rise in private-sector investment, Sitharaman said she “wants to hear from industry” on what exactly it needs. She pointed out that whenever the government provided incentives, it faced political criticism that reforms benefited only two companies. “Do you want the Indian economy to be credited with something or not? What Indian people do is of no value to you?”