Source: The Economic Times, Feb 02, 2017
Finance minister Arun Jaitley has proposed abolition of the Foreign Investment Promotion Board (FIPB), a move that sets the stage for more reforms in the FDI policy. Housed in the finance ministry’s Department of Economic Affairs, the FIPB is an inter-ministerial body responsible for processing of FDI proposals and making recommendations for government approval.
It was initially constituted under the Prime Minister’s Office in the wake of the economic liberalisation drive of the early 1990s. “FIPB has successfully implemented e-filing and online processing of FDI applications,” Jaitley said in his Budget speech. “We have now reached a stage where FIPB can be phased out.”
The government is yet to announce the modalities of the new system of processing applications, which fall under the approval route. The finance minister said a road map for the post-FIPB scenario will be announced in the next few months.
“We will have to see how the policy will develop in the days to come and if concerned departments will be given the authority to consider the FDI proposals,” a senior government official told ET. The government is also considering further liberalisation of the FDI policy and will make necessary announcements in the due course, the minister said.
More than 90% of FDI inflows are now through the automatic route. FDI in India rose to Rs 145,000 crore in the first half of 2016-17, a 35.5% jump over Rs 107,000 crore in the year-ago period. The increase came at a time when global FDI inflows fell 5%.
Experts said they will wait to see if abolition of the FIPB will bring about ease of doing business and simplify procedures. The FIPB had been meeting twice a month since 2015 to speed up approvals.
“FIPB was processing the foreign investment proposals in a time-bound manner, in consultation with various ministries. We have to wait for the announcement of the road map for foreign investment proposals to understand the impact of the move,” said Devraj Singh, executive director-tax and regulatory services at Ernst & Young.
The Department of Industrial Policy and Promotion is expected to release the annual consolidated FDI policy circular by March.
“It will be interesting to see the approval mechanism that will be put in place for sectors currently under approval route such as retail trade, defence and in-kind (non-cash) FDI investments,” said Radhika Jain, director at Grant Thornton Advisory.