Liberalising foreign investment norms and encouraging inflow of FDI have been some of the key focal points of the Indian Government's economic policy for the past decade. For over six fiscal years, India has seen a steady increase in FDI inflows, interrupted for the first time in the first financial quarter of 2019. In September 2019, India diluted FDI restrictions across sectors such as single-brand retail trading, commercial coal mining and contract manufacturing. This increasing focus on foreign investment is, however, situated in the backdrop of India's reluctance towards committing to international treaties guaranteeing investor and investment protection.
Since the 2011 Investment Arbitration award in favour of White Industries against India, there have been multiple arbitration claims filed against India by foreign investors. India has reacted to these claims by serving notices of termination under a majority of its BITs and has released a Model BIT in 2016, which expands regulatory space and limits investor protection. This article provides insights into India's policy on foreign investment, contextualises, and contrasts the dichotomy between a highly liberalised FDI regime and an overly cautious approach towards investment treaty protection. The article highlights the various contemporary issues in India's foreign investment laws, identifies the relationship between BITs and FDI inflow, and traces, through case law, the rationale behind India's current position on BITs.
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For over six fiscal years, India has seen a steady increase in FDI inflows, interrupted for the first time in the first financial quarter of 2019.
Under the India's regulatory regime, FDI can only be made into equity shares, fully and compulsorily convertible preference shares ("CCPS") and fully and compulsorily convertible debentures ("CCD") and subject to fulfilment of certain conditions, partly paid shares and warrants.