Although Overseas Citizenship of India is not a full citizenship of India, it is a form of Indian nationality. Article 4 of the Hague Convention on Certain Questions relating to the Conflict of Nationality Laws, 1930 provides that "a State may not afford diplomatic protection to one of its nationals against a state whose nationality such person also possesses". Therefore, international law limits the ability of a country to provide consular protection to its citizens or nationals in their country of second nationality. A person registered as an Overseas citizen of India, who is also a citizen of another country will therefore lose their right to consular protection of their home country when in India.
Many persons of Indian origin eligible to apply for Overseas citizenship of India are considering whether they prefer to obtain Overseas citizenship of India, or a Person of Indian Origin card (PIO card - see below) which offers virtually identical benefits while preserving their right to consular protection in India.
Citizenship clarifications issued by the Authorities
British House of Lords Written Answer on matters related to Overseas Citizenship of India
House of Lords StatementHouse of Lords, 6 July 2005, Column WA 90
Lord Avebury asked Her Majesty's Government:
Whether (a) a British subject under the British Nationality Act 1981, other than by connection to the Republic of Ireland, or (b) a British protected person, who acquires by registration Overseas Citizenship of India would automatically lose the status as a British subject or British protected person as a consequence; and [HL729]
Whether an otherwise stateless British overseas citizen, British subject (under the British Nationality Act 1981) or British protected person who acquires overseas citizenship of India would automatically cease to have an entitlement to register as a British citizen under Section 4B of the British Nationality Act 1981. [HL730]
Baroness Scotland of Asthal (Minister of State, Home Office):
If a British subject under the British Nationality Act 1981, other than by connection to the Republic of Ireland, or a British protected person, acquired Indian Overseas citizenship they would automatically lose their status as a British subject or British protected person.
Any British national holding Indian Overseas citizenship would be ineligible for registration as a British citizen {added to clarify} under Section 4B since they could not meet the requirements of Section 4B(2)(b) of the British Nationality Act 1981 to hold no other citizenship or nationality.
http://www.fco.gov.uk/Files/kfile/NOTE VERBALE.pdf
http://www.publications.parliament.uk/pa/ld199900/ldhansrd/pdvn/lds05/text/51019w02.htm
http://en.wikipedia.org/wiki/Indian_nationality_law