In a move to fast-track ease of doing business in the country, the Union Cabinet chaired by Prime Minister Narendra Modi, approved phasing out the 25-year-old Foreign Investment Promotion Board (FIPB) on Wednesday. The FIPB, which was earlier vetting foreign direct investment or FDI proposals and requiring Government approvals, will now be replaced by a new mechanism under which the proposals will be approved by the concerned ministries.
The move to wind up the FIPB is aimed at making India a more attractive FDI destination by providing greater ease of doing business and promoting the ‘Maximum Governance and Minimum Government’.
Finance Minister Arun Jaitley in his Budget speech on February 1 had announced the scrapping of the inter-ministerial body, which comes under the Ministry’s Department of Economic Affairs.
Briefing the media after the Cabinet meeting here, Jaitley said, “FIPB will be replaced by a new mechanism under which the proposals will be approved by the ministries concerned as per the standard operating procedure approved by the Cabinet. The proposals in sensitive sectors will require the Home Ministry’s approval.”
He further said that the proposals pending with FIPB would go back to the ministries concerned. Currently, only 11 sectors, including defence and retail trading, require the Government approval for foreign direct investment (FDI).
Jaitley, however, said, “About 91-95 per cent of FDI proposals are under the automatic route. There could also be a provision for quarterly review of pending proposals by the Economic Affairs Secretary and annual review by the Finance Minister.”
The FIPB was initially set up under the Prime Minister’s Office (PMO) following the economic liberalisation in the early 1990s. It shifted under the DIPP in 1996, and then in 2003 to the Department of Economic Affairs in the Finance Ministry.
The FDI proposals above Rs 5,000 crore would continue to be cleared by the Cabinet Committee on Economic Affairs. Inflow of foreign direct investment into India has been increased by 9 per cent to $43.48 billion in 2016-17.
Meanwhile, the Government also approved raising of Rs 2,360 crore through bonds for renewable energy projects in the current fiscal. “The Cabinet has given its approval to raising of bonds of Rs 2,360 crore for renewable energy,” Ministry of New and Renewable Energy said in a statement.