India May Cut the 5-Year Wait for Foreign Investors to 2 Years

India is preparing to update the framework governing how foreign investments are protected and how investment disputes are handled.

The development is important because India is simultaneously negotiating new bilateral investment treaties with major economies, including the UK, European Union, Oman and Qatar.

The proposed framework is not a complete reset.

Recent reporting indicates that India intends to retain the requirement for foreign investors to pursue local legal remedies before accessing treaty-based international arbitration, although the existing five-year period could potentially be shortened.

For international companies, the message is straightforward:

India remains a major market opportunity, but understanding the legal and institutional framework should be part of market-entry strategy—not an issue considered after the investment is made.

Key Takeaways

• India is preparing an updated Model Bilateral Investment Treaty framework.
• The draft framework is awaiting Union Cabinet approval.
• India is reportedly close to concluding BITs with the UK, EU, Oman and Qatar.
• The requirement to pursue local legal remedies before international arbitration is expected to remain.
• The current five-year period could potentially be shortened, according to sources cited by Reuters.
• Taxation is expected to remain outside the scope of investment treaties.
• For international companies, investment protection, dispute resolution and treaty coverage should be evaluated before committing significant capital.

Main Article

India is changing the fine print around foreign investment

When companies evaluate India, the conversation usually starts with the obvious questions.

How large is the market?

Where are the customers?

Who are the competitors?

Where should we establish operations?

Which partner should we work with?

But sophisticated international investors eventually have to ask another question:

What happens if something goes wrong?

That question sits at the heart of India's ongoing review of its bilateral investment treaty framework.

According to recent reporting, India is preparing an updated Model BIT while simultaneously negotiating investment treaties with several major trading and investment partners.

The changes could have a meaningful impact on how international companies think about long-term investment in India.

What is a Bilateral Investment Treaty?

A Bilateral Investment Treaty is an agreement between two countries that establishes certain protections and rules for investments made by investors from one country in the other.

Among other things, BITs can establish mechanisms for resolving investment disputes.

For an international company investing significant amounts of capital in a new market, that framework can matter.

A company committing capital to a factory, technology centre, infrastructure project, financial services operation or other long-term asset is making decisions based not only on today's commercial opportunity but also on the institutional environment surrounding the investment.

India's current framework has been controversial among investors

India's existing Model BIT framework dates from 2015.

One of its important provisions requires investors to pursue local legal remedies before initiating treaty-based international arbitration.

Under the current framework, the period can extend to five years.

Foreign businesses and some industry representatives have argued that such a requirement creates uncertainty and can make dispute resolution lengthy.

Reuters reported on September 25 that the government is not planning a fundamental departure from the requirement that investors first pursue local remedies.

However, sources indicated that the five-year period could potentially be reduced to two years.

The exact framework remains subject to the government's approval process.

That distinction matters.

The rules being discussed are not necessarily the rules that will ultimately be implemented.

Why is this happening now?

The timing is important.

India is trying to attract sustained foreign investment while simultaneously negotiating a number of major trade and investment agreements.

Business Standard reported on September 25 that India is close to concluding bilateral investment treaties with the UK, European Union, Oman and Qatar under an updated framework.

India has also recently begun negotiations with Canada.

This creates an interesting tension.

India wants greater access to international capital, technology and businesses.

At the same time, it wants to preserve significant control over areas such as taxation and domestic legal processes.

The new framework is an attempt to establish where those boundaries sit.

The important point for global companies: don't confuse opportunity with certainty

India can offer substantial commercial opportunities.

But market opportunity and investment protection are two different questions.

An international company might identify a strong market for its product, decide to establish a local operation and invest millions of dollars.

That does not automatically mean the company has a treaty-based route to international arbitration if a serious dispute arises.

The answer depends on several factors, including:

• The company's country of incorporation
• Whether a relevant BIT exists
• The language of the applicable treaty
• The nature of the investment
• The type of dispute
• The applicable domestic legal framework
• The date on which the investment was made
• The dispute-resolution provisions in the relevant treaty

This is why treaty analysis should happen before the investment decision—not after a dispute emerges.

The opportunity is bigger than legal protection

There is another important lesson here for international companies entering India.

A strong market-entry strategy cannot consist only of identifying customers.

Companies also need to understand the institutional ecosystem around their investment.

That can include:

Government stakeholders

Which ministries, departments and state authorities are relevant to the investment?

Industry associations

Which organisations represent the sector and influence policy discussions?

Legal and regulatory advisers

Who understands the specific regulatory environment in the relevant industry?

Local partners

Which Indian businesses can help navigate commercial and operational complexity?

Financial institutions

Which banks, investors and financial partners understand the sector?

Business networks

Which relationships can help an international company understand how decisions are actually made?

This is where market access becomes more than a sales exercise.

India is negotiating with multiple economies at the same time

The current BIT negotiations also reveal something strategically important.

India's relationship with international investors is becoming increasingly bilateral and sector-specific.

The country is simultaneously negotiating agreements with several economies while also pursuing broader trade agreements.

Business Standard reported that negotiations are progressing with the UK, EU, Oman and Qatar, with Canada also entering the process.

For businesses headquartered in these markets, the eventual treaty arrangements could become another variable in India investment planning.

But companies should not wait for a treaty to make every market-entry decision.

The commercial opportunity may exist well before the legal framework is finalised.

What should an international company do before investing?

A practical India investment assessment should include at least six questions.

1. What exactly are we investing in?

A sales office, manufacturing facility, technology centre, R&D operation and infrastructure project may face very different regulatory considerations.

2. What treaty protections potentially apply?

Companies should examine whether a BIT exists between India and the investor's home jurisdiction and understand its scope.

3. Where is the investment actually being made?

India's states have their own regulatory, industrial and commercial environments.

Location can materially affect the operating model.

4. Who are the local stakeholders?

Understanding the relevant government departments, industry bodies, partners and institutions can reduce uncertainty during execution.

5. What happens if the commercial relationship breaks down?

Contracts, governing law, arbitration clauses and treaty protections should be considered as part of the original investment structure.

6. Who can help us navigate the ecosystem?

This may be the most overlooked question.

The right local relationship can help an international company understand issues that are difficult to discover through desk research alone.

The biggest mistake is treating India as one transaction

An international company does not really "enter India."

It enters a network.

Customers.

Partners.

Regulators.

Suppliers.

Employees.

Industry associations.

Investors.

Government stakeholders.

Technology providers.

Professional advisers.

And sometimes competitors who can also become ecosystem partners.

The strength of these relationships can influence how effectively a company operates after the initial investment decision.

This is particularly important when an investment is expected to remain in the country for many years.

The next phase of India's foreign investment story

The BIT debate is ultimately about something larger than arbitration.

It is about the architecture around international capital.

India wants to attract investment while preserving policy space.

Foreign companies want access to India's market while seeking predictability around their investments.

Both objectives can coexist, but the details matter.

For international companies, this means India market entry needs to become increasingly sophisticated.

The question should not simply be:

“How big is the opportunity?”

It should also be:

“What are the rules, who are the stakeholders, and how do we build the relationships required to operate successfully?”

That is a much more complete way of looking at market entry.

Frequently Asked Questions

What is India's new Bilateral Investment Treaty framework?

India is preparing an updated Model Bilateral Investment Treaty framework intended to govern future investment agreements with other countries. The draft is reportedly awaiting Union Cabinet approval.

Will foreign investors still need to use Indian courts before international arbitration?

Based on recent reporting, the requirement to pursue local legal remedies is expected to remain. Reuters reported that the current five-year period could potentially be shortened, possibly to two years.

Which countries is India negotiating investment treaties with?

Recent reporting indicates that India is close to concluding BITs with the UK, European Union, Oman and Qatar. Negotiations have also begun with Canada.

Will taxation be covered by the new investment treaties?

Recent reports indicate that taxation disputes are expected to remain outside the scope of the investment treaty framework, with India retaining its sovereign authority over taxation.

Does this mean international companies should wait before investing in India?

Not necessarily. The treaty framework is only one component of an investment decision. Companies should evaluate their commercial opportunity, regulatory environment, investment structure, treaty coverage and risk-management arrangements independently.

What should companies entering India evaluate besides market size?

Companies should evaluate customers, competitors, partners, regulators, state-level policies, contracts, dispute-resolution mechanisms, suppliers, talent and the broader ecosystem required to operate successfully.

Final Thoughts

India's foreign investment story is entering a more sophisticated phase.

The conversation is no longer simply about whether India can attract international capital.

It is about the framework within which that capital will operate.

The emerging BIT framework will matter. So will trade agreements, state-level policies, regulation, infrastructure, talent and the quality of local commercial relationships.

For an international company considering India, the smartest preparation happens before the investment is made.

Understand the market.

Understand the rules.

Understand the ecosystem.

And, perhaps most importantly:

Understand whom you need to know.

About Kalantic

Kalantic helps international companies develop business opportunities in India through market access, relationship development, partnerships and on-ground business development.

We help companies identify relevant stakeholders, build relationships and turn India market-entry strategies into commercial opportunities.

Whom should we know?

Sources

• Reuters, “India doesn't plan huge changes to dispute resolution with foreign companies, source says,” September 25, 2026. https://www.reuters.com/world/asia-pacific/india-doesnt-plan-huge-changes-dispute-resolution-with-foreign-companies-source-2026-09-25/

• Business Standard, “India close to concluding four BITs under updated treaty framework,” September 25, 2026. https://www.business-standard.com/economy/news/india-bilateral-investment-treaties-bit-uk-eu-oman-qatar-126092500463_1.html

• BusinessToday, “Cabinet set to clear revamped Bilateral Investment Treaty as India woos foreign capital,” September 25, 2026. https://www.businesstoday.in/latest/economy/story/cabinet-set-to-clear-revamped-bilateral-investment-treaty-as-india-woos-foreign-capital-557783-2026-09-25