Journalism of Courage
Reviving the debate over who should control the country’s foreign investment policy, the finance ministry and the department of industrial policy and promotion (DIPP) have raised the issue with their new ministers.
“The finance ministry controls all economic policies but for that relating to foreign direct investments. Further, it also governs the Foreign Exchange Management Act (FEMA),” said a senior government official.
The issue is understood to have been raised by the department of economic affairs in their presentation last week to finance minister Arun Jaitley.
“Bringing it under control of the finance ministry will also help streamline the formation and administration of FDI policies,” the official said, referring to the inter-ministerial differences that often crop up over sectoral policies that result in a lack of clarity for investors.
Meanwhile, the DIPP is also understood to have pitched for full control over the foreign direct investment (FDI) policy to minister of state for commerce and industry (independent charge) Nirmala Sitharaman.
Officials in both departments are hopeful that the ministers will take a call on the issue soon.
Significantly, Sitharaman is also the minister of state for finance and is expected to work in close coordination with Jaitley.
Under the current system, the Foreign Investment Promotion Board is housed in the finance ministry and chaired by the secretary of the department of economic affairs. Wile the department of economic affairs looks at formulation of FDI policies along with the DIPP, it is the latter that notifies all such policy decisions.
However, this was not always the case. The FIPB was originally transferred to the DIPP from the Prime Minister’s Office in 1996 but was then given over to the finance ministry in 2003.
There have been several instances of differences between the two ministries over formulation of FDI policies.
The most recent was in the case of investments in the pharmaceuticals sector where the Prime Minister’s Office had to finally step in to resolve the matter.
