Executive Summary In view of the catalytic role of foreign direct investment (FDI) in promoting economic development, countries adopt various unilateral as well as bilateral arrangements to create a conducive environment for FDI. One such significant form of arrangement is bilateral investment treaties (BITs). As sizeable cost and resources are involved in treaty formation, it becomes important to examine the potential benefits of BITs for investment and whether such measures actually translate into higher FDI flows. This article employs panel data regression on an augmented gravity model (under both static and dynamic conditions) to identify the determinants of FDI inflows into India with a special focus on the role of BITs. The panel data span over the period 2001–2012 and include the top investing countries in India accounting for around 92 per cent of India’s total FDI inflows. The explanatory variables employed are extended market size, vertical FDI drive, distance, colonial links, common language, political stability, financial openness, and population growth rate. BIT is incorporated as a dummy variable which takes the value 1 if a BIT exists between India and the investing countries in a given year, otherwise 0. The results for both the fixed effects and the two-step generalized method of moments (GMM) model specifications confirm the positive role of BITs in attracting FDI inflows into India. BITs have contributed to rising FDI inflows by providing protection and commitment to foreign investors contemplating investment in India. The model also finds support for other factors facilitating FDI such as the large size of the economy and a more liberal FDI regime. As attracting FDI is an important policy objective of developing countries like India, the results imply that one of the instruments of achieving this objective is for the government to negotiate BITs with countries which are prospective investors. By laying down clear guidelines with respect to investment and widening the scope of investment activities covered under a bilateral agreement, an environment of certainty is created which would facilitate FDI flows.

Developing countries have an urge to boost economic development and they provide a supportive platform for production units with less stringent environment norms. Hence substantial numbers of manufacturing units are moving from developed economies to developing economies. Such a shift is leading to an upsurge in foreign direct investment (FDI) inflows in the developing economies. The study is an attempt to find relationship between FDI (inflows) and environmental degradation using a sample size of 14 developing Asian economies over the period of 1971–2019 using panel autoregressive distributed lag specifications. Study adopts Environmental Kuznet Curve (EKC) technique to validate the existence of pollution havens in the region. Two panel regression equations were formed: first equation covers the link between economic growth (income per capita) and environment by incorporating square of GDP per capita as one of the explanatory variable. The second equation examines the relation between investment and environmental degradation by accommodating square of FDI as one of the dependent variable. The long-run results for first equation validated the presence of EKC, supporting the presence of pollution havens in the region. Long-run results for non-linear FDI depicted positive and significant outcome (using pooled mean group) indicating negligence towards environment. The results indicated that developing countries are not working towards inviting investment flows which are more environment friendly.

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