March 31: The government on Thursday eased the foreign investment rules in order to increase the FDI inflows into the country. Now foreign companies will not need the government’s approval to set up new businesses in the country if they have an existing joint venture in the same industry. The earlier rule stated that foreign firms will have to take the permission from its Indian partner if it independently wanted to venture in the same business where the joint venture was already operating.
The foreign companies have been complaining that the local partners were misusing this rule and tried to extract undue commercial interests. The most famous case where this provision was used by an Indian company was by the Wadia group and its French partner Danone. Both these companies were equal partners in Britannia. But their relations turned hostile when Danone tried to get a no objection certificate from Wadia’s to make fresh investment in India. Danone, had to sell its stake in Britannia to make a separate foray into the country. The CII director general, Mr Chandrajit Banerjee, said: “Indian industry has reached a stage of economic maturity and can negotiate JVs with its foreign counterparts on an equal footing.”