The Union Cabinet on Wednesday scrapped the 25-year-old Foreign Investment Promotion Board (FIPB), which has been overseeing foreign direct investment (FDI) proposals requiring government approval. FIPB is an inter-ministerial body under the finance ministry’s Department of Economic Affairs that processes FDI proposals and makes recommendations for government approval.
Union Finance Minister Arun Jaitley had previously in Budget 2017-18 proposed the abolition of FIPB. Currently, sectors that are under the approval route for FDI include defence and retail trading. The FDI proposals above Rs 5,000 crore would continue to be cleared by the Cabinet Committee on Economic Affairs. The decision to scrap FIPB was taken by the Cabinet, chaired by Prime Minister Narendra Modi, Jaitley said while briefing the media after the meeting. The finance minister said that 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. However, he clarified that certain proposals which fall under sensitive sectors will require the home ministry’s approval. As for the pending proposals with FIPB, Jaitley said they will go back to the ministries concerned.
The FIPB was initially constituted under the Prime Minister’s Office in the wake of economic liberalisation in the early 1990s. Sources added that the government is considering to come up with a standard operating procedure for clearance of FDI proposals in these 11 sectors. As of today, only 11 sectors, including retail trading and defence, require government approval for foreign direct investment (FDI).
Jaitley also said that about 91-95 per cent of FDI proposals are under the automatic route. Inflow of foreign direct investment into India increased by 9 per cent to USD 43.48 billion in 2016-17.