India has scrapped the 25-year-old foreign investment advisory body Foreign Investment Promotion Board as it looks to attract more foreign direct investment by providing quick approvals under a single-
window clearance system.
The Union cabinet on Wednesday decided to abolish the FIPB -- an advisory body comprising of secretaries to various departments for vetting of applications and making recommendations to the government.
The approvals would be handled independently by administrative ministries of different sectors, Finance Minister Arun Jaitley said after the cabinet meeting.
The FIPB was set up after India embarked on its first market reforms in 1991. It was initially constituted under the Prime Minister's Office and subsequently shifted under the Department of Economic Affairs in the Ministry of Finance. Industry experts termed the move as 'administrative clean-up' by removing repetitive steps for approval.
This would result in investors having to deal with only a single authority.
In two previous tranches of FDI liberalisation, the Bharatiya Janata Party-led government has already ensured that more than 90 per cent of total FDI inflows are now through the automatic route.
Also, the FIPB has put in place e-filing and online processing of FDI applications.
When asked how the timelines would be fixed for deciding cases in absence of the FIPB, Jaitley said 'this came up for discussion and the cabinet secretary will be sorting out the time mechanism'.
However, he added that the government would try to approve the FDI proposals immediately.
"Henceforth, the work relating to processing of applications for FDI and approval of the government thereon under the extant FDI Policy and FEMA (Foreign Exchange Management Act) shall now be handled by the concerned ministries/departments in consultation with the Department of Industrial Policy and Promotion," he said.
The DIPP will also issue the Standard Operating Procedure for processing of applications and decision of the government under the extant FDI policy, he added.
Jaitley said the move will make India more attractive destination for foreign investors and will result in more inflow of FDI.
The move will provide ease of doing business and will help in promoting the principle of 'Maximum Governance and Minimum Government'.
Proposals in sensitive sectors will require the home ministry's approval.
On the proposals pending with the FIPB, he said they will go back to the ministries concerned.
The FIPB was constituted under the Prime Minister's Office following economic liberalisation in the early 1990s.
Currently, only 11 sectors, including defence and retail trading, require the government approval for FDI.
Currently, about 91-95 per cent of FDI is coming through the automatic route. There would also be a provision for quarterly review of pending FDI proposals by the DIPP and the department of economic affairs.
Foreign investment proposals above Rs 5,000 crore would continue to be cleared by the Cabinet Committee on Economic Affairs.
Meanwhile, the DIPP in a series of tweets stated that rejection of FDI proposals would be made difficult and concurrence of the DIPP would be mandatory.
"Imposition of conditions other than those provided in the FDI will also require DIPP's concurrence. Retail, NRI and issue of shares against non-cash consideration proposals for FDI would have to be approved by the DIPP," it said.
Further, it added that all FDI from Pakistan and Bangladesh would require government approval. FDI proposals in private security agencies and manufacture of small arms would be approved by Ministry of Home Affairs.
"Foreign investors will find India more attractive destination and this will result in more inflow of FDI. The move will provide ease of doing business and will help in promoting the principle of maximum governance and minimum government," the commerce ministry said.
Inflow of foreign direct investment into India increased by 9 per cent to $43.48 billion (Rs 2.82 lakh) in 2016-17.