Foreign companies that have an existing joint venture in India will no longer be required to get a no-objection certificate from their joint venture partner before venturing in India on their own or with another local ally in the same field of business. The Government hopes to attract more foreign direct investment by scrapping of the controversial Press Note 1.

Foreign companies that have an existing joint venture in India will no longer be required to get a no-objection certificate from their joint venture partner before venturing in India on their own or with another local ally in the same field of business. The Government hopes to attract more foreign direct investment by scrapping of the controversial Press Note 1.

Sources in the Industry department that administers the FDI regime have said (as reported in ET) “There is a need to attract fresh investment and technology inflows into the country, as also to reduce the levels of state intervention in the commercial sphere. It is expected that this measure will promote the competitiveness of India as an investment destination and be instrumental in attracting higher levels of FDI and technology inflows into the country”.

FICCI director-general said, “Times have changed and we certainly need a more liberal FDI policy framework to attract larger amounts of foreign investments. This is especially needed in the context of declining FDI flows in the past few months. FICCI is examining the implications of this announcement, particularly in context of global competitiveness and technological development of Indian industry”.

The 2005 policy provided that the foreign investor would need a no objection certificate from a local partner if it decided to go on its own in a similar line of business as an existing venture. It also said the rule will not apply to ventures set up after 2005, which were to be governed by the shareholder agreements between the two partners. A number of Indian promoters had invoked this provision to block their foreign joint venture partner from floating fresh ventures.

The Government for a long time was planning to scrap Press Note 1 to boost FDI.