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India - Plans To Abolish Press Note 1
December 2008 | India Practice | Regional | Regional Reports

The government of India now has plans to abolish Press Note 1, which has been a bane to foreign investors. Press Note 1, formulated in 2005 to dilute Press Note 18, requires a foreign company to obtain a No-Objection Certificate (“NOC”) from its Indian partner if it plans to set up a wholly owned subsidiary in an “allied field”. The NOC requirement applies to joint ventures established before January 2005.

The negative uncertainties caused by Press Note 1 have delayed foreign investments into India and caused multinationals to consider investing in China instead.

The move to abolish Press Note 1 has been supported by the Finance Ministry, which concedes that the need to obtain the Foreign Investment Promotion Board (“FIPB”) approval and NOC from an Indian party can be an impediment to foreign investment into India.

The Department of Industrial Policy and Promotion are of the view that if the government abolishes Press Note 1, India will attract more direct foreign investment. However, the government may require foreign investors to comply with a mandatory lock-in period before being allowed to establish a new venture in the same field.