Press Note 1: Changes Expected

Press Note 1 of 2005 issued by the Department of Industrial Policy & Promotion (DIPP) requires foreign companies to obtain the prior permission of the Foreign Investment Promotion Board (and thereby making the automatic route for investment ineligible) if they had a joint venture with another Indian partner in the same field. This condition is applicable for joint venture existing in January 2005 (when the press note was issued). Press Note 1 is the diluted version of a more onerous previous Press Note 18 of 1998.

The Economic Times reports that the Government plans to do away with Press Note 1 thereby making it easier for foreign companies to make investments into India where they have had a previous joint venture. This still appears to be in the stage of a proposal only, and it is not clear what form the ultimate change will take, i.e. whether this requirement will be done away with altogether, or whether it would only be diluted further.

On a separate note, about a year ago I had set out some observations on the need to review Press Note 1 in the light of changed circumstances over the years.

(Update – July 21, 2008: Today’s Economic Times carries an editorial titled “Get rid of Press Note 1”)

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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