In a major move to ease doing business in India, the Union Cabinet on May 24 abolished the 25-year-old Foreign Investment Promotion Board (FIPB), eliminating the need for prior clearance for Foreign Direct Investment in more than 90% of cases. The industry has lauded the move as a "bold" step that would add to the healthy inflow of foreign investment.
Announcing the decision, Finance Minister Arun Jaitley said that after the move, only 11 sectors would require prior approval for Foreign Direct Investments (FDI). Explaining the rationale behind the decision, the Minister said that after the liberalisation of FDI rules, 91-95% of FDI was coming in anyway through the "automatic" route, without needing FIPB clearance.
The Union Budget 2017-18 presented in February had announced the proposal for abolition of FIPB. He also said that in case of the 11 sectors that need prior approval for FDI, these would now be given by the ministries concerned. Wherever there are security considerations, the Home Minister's approval would also be taken, he added.
Asked about how long the process of abolition would take, Jaitley said this would be done expeditiously. Cases pending for approval with the FIPB would now be taken up by the respective ministries, the Finance Minister clarified.
The FIPB was set up in the early 1990s as an inter-ministerial single-window for allowing FDIs that need government approval. The government relaxed FDI norms in June 2016 in single brand retail, civil aviation, airports, pharmaceuticals, animal husbandry and food products, whereby investors in these sectors do not need to seek approval from the FIPB.
The Confederation of Indian Industry (CII) welcomed the decision as a "bold step" that "would streamline the process of FDI approvals and thereby boost FDI flows into the country, adding to growth and employment."
"Already, the government has among the most liberal FDI regimes in the world, which has greatly improved the investment climate. As a result, for the last three years, FDI has been on the ascendant and is setting new records," CII Director General Chandrajit Banerjee said. IANS