Much Ado About Half Measures! Reform Happens In Bit And Pieces

In a bid to streamline, rationalise and liberalise the method of calculation of indirect foreign investment across sectors and make the foreign investment regime in India more transparent from the perspective of downstream investment, the Indian Government amended the existing guidelines recently through issue of Press Note 2 of 2009, Press Note 3 2009 and Press Note 4 of 2009 ("the Press Notes") or ("the Guidelines")¹.

Though, the Press Notes assert to clarify the legal position on oft debated issues like cascading or downstream foreign investments in Indian companies through Indian investing companies and transfer of shares in companies that have sectoral caps, in essence these new Guidelines only partially address the real issues involved. The clarifications may be a non-starter as the policy makers seem to have failed to comprehensively achieve the intended objective and have created more confusion in the bargain.