The Impact of Bilateral Investment Treaties on FDI Inflows Into India: Some Empirical Results

Date01 August 2022
DOI10.1177/00157325211027374
Published date01 August 2022
AuthorVatsala Shreeti,Jaivir Singh,Parnil Urdhwareshe
Subject MatterArticles
The Impact of Bilateral
Investment Treaties on
FDI Inflows Into India:
Some Empirical Results
Jaivir Singh1, Vatsala Shreeti2 and
Parnil Urdhwareshe3
Abstract
After a run of adverse investor-state dispute settlements, India has recently
denounced all its erstwhile investment treaties. New investment treaties need to
be negotiated on the basis of a new Model Treaty that privilege state rights over
investor rights. We study the impact of bilateral investment treaties on foreign
direct investment (FDI) inflows into India before the denunciation with the intent
of inferring the consequences of changing the system. Our work captures the
effects of international investment agreements on FDI inflows specifically into
India. We construct an empirical model drawing on the Gravity Model, and esti-
mate parameters using generalised method of moments. The results show that
while the individual signing of bilateral investment treaties does not influence the
inflow of FDI, the effect of the cumulative bilateral investment treaties signed is
statistically very significant—suggesting that the spill over effect of signing a series
of bilateral investment treaties are important, signalling a regime of overall pro-
tection to investors. The importance of institutional variables in influencing FDI
tells us that overall participation in a system governed by international investor
agreements influenced the inflow of FDI positively and therefore recent policy
changes should be viewed with caution.
JEL Codes: F21, F23, F550, F63, K33, O19, C22, C29
Keywords
BITs, international investment agreements, FDI inflows into India, gravity model,
generalised method of moments
Article
1 Centre for the Study of Law and Governance, Jawaharlal Nehru University, New Delhi, India.
2
Toulouse School of Economics, Toulouse, Occitanie, France.
3 Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India.
Corresponding author:
Jaivir Singh, Centre for the Study of Law and Governance, Jawaharlal Nehru University, New Mehrauli
Road, New Delhi 110067, India.
E-mail: jaivirs@gmail.com
Foreign Trade Review
57(3) 310–323, 2022
© 2021 Indian Institute of
Foreign Trade
Reprints and permissions:
in.sagepub.com/journals-permissions-india
DOI: 10.1177/00157325211027374
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