Scrapping of Press Note 18: Impact on Indian joint ventures *

Abstract:

The core of this caselet is the opening up of the Indian market for foreign investments. It explains how the Government of India tried to protect Indian joint venture partners through Press Note 18. It focuses on the misuse of the provisions of this Press Note by Indian joint venture partners and discusses the replacement of Press Note 18 with Press Note 1. The impact of the scrapping of Press Note 18 on Indian firms is also examined.

Issues: » Liberalization of the Indian market for FDI. » Recommendations of FIPB and the issue of Press Note 18. » Misuse of provisions of Press Note 18 by Indian firms. » Scrapping of Press Note 18 and replacement with Press Note 1. Introduction The process of opening up the Indian market to foreign direct investments (FDI) began in July 1991. At the beginning, only specified levels of FDIs were allowed in certain sectors. This gave foreign firms an opportunity to enter into joint ventures (JVs) with Indian companies and thus JVs started growing rapidly in many sectors. During the same time, the Government of India (GoI) wanted to protect the Indian JV partner from its foreign counterpart, who could resort to joining hands with another Indian partner or float a wholly owned Indian subsidiary...

Questions for Discussion:

1. What are the advantages of scrapping Press Note 18?
2. The scrapping of Press Note 18 prevents the Indian JV partner from misusing its provisions but at the same time puts them in danger. Explain.

Key words:
Foreign direct investments (FDI), joint ventures (JVs), Government of India (GoI), Foreign Investment Promotion Board (FIPB), information technology, international financial institutions, mining, collaborations, Project Approval Board (PAB), arbitrator, Press Note 18, Press Note 1

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