Govt to abolish Foreign Investment Promotion Board: Finance Minister

FIPB had the final say in approving FDI proposals in the country for long

The Foreign Investment Promotion Board (FIPB) has been decided to be abolished, Finance Minister Arun Jaitley declared in his budget presentation on Tuesday.

While, the FIPB had the final say in approving Foreign Direct Investment (FDI) proposals in the country for long, its power has been systematically reduced under the current government. Most notably, back in June, 2016 the government had announced relaxed FDI norms in single brand retail, civil aviation, airports, pharmaceuticals, animal husbandry and food products.

It had allowed up to 100% FDI in defence through the approval route, 100 per cent FDI in food product e-commerce, 100 per cent FDI in greenfield pharma via the automatic route, 100% in browfield pharma — of which 74% will be through automatic route — 100 per cent FDI in scheduled airlines, and up to 49 per cent FDI in airlines through automatic route.

In the last two years, the government has brought major FDI policy reforms in a number of sectors, including defence, construction development, insurance, pension sector, broadcasting sector, tea, coffee, rubber, cardamom, palm oil tree and olive oil tree plantations, single brand retail trading, manufacturing sector, limited liability partnerships, civil aviation, credit information companies, satellites - establishment/operation and asset reconstruction companies.

Incoming FDI grew 27 per cent in the first seven months of the fiscal to $27.82 billion, from $21.87 billion a year ago. Manufacturing accounted for 41.5 per cent of the total equity inflows into the country during April-October, according to the Department of Industrial Policy and Promotion’s (DIPP) year-end review. 

This happened at a time when the government made a fervent pitch abroad for ‘Make in India’ to make India a manufacturing hub of the world and generate large scale employment. Services, telecom, trading, computer hardware and software and automobiles were among the major sectors that attracted FDI during this period. 

"During April-September 2016-17, FDI equity inflows were $21.7 billion as compared to total FDI inflows of $16.6 billion during April-September 2015-16, showing 30.7 per cent surge," the Economic survey pointed out on Monday. The government has been pushing for enhancing ease of doing business and a favourable patent regime to make India an attractive investment destination.

Currently, the Finance Minister considers the recommendations of FIPB on proposals with total foreign equity inflow of and below Rs 3000 crore. The recommendations of FIPB on proposals with total foreign equity inflow of more than Rs 3000 crore is placed for consideration of Cabinet Committee on Economic Affairs (CCEA).

FIPB down the years

* The FIPB was initially constituted under the Prime Minister's Office (PMO) in the wake of the economic liberalization drive of the early 1990s. The recommendations of the FIPB were approved through a 3-tier approval mechanism, viz. FIPB as a committee of senior officials to examine and make recommendations; Empowered Committee on Foreign Investment (ECFI) chaired by the Finance Minister for deciding on the recommendations of the FIPB for projects in which the total investment in the project was up to Rs 300 crore; and the Cabinet Committee on Foreign Investment (CCFI) for deciding on the recommendations of the FIPB for projects in which the total investment was more than Rs 300 crore.

* The Board was reconstituted in 1996 with transfer of the FIPB to DIPP and approval levels were as under: Recommendations of FIPB in respect of the project proposals each involving a total investment of Rs 600 Crore or less would be considered and approved by the Industry Minister. The recommendations in respect of the projects each with a total investment of above Rs 600 Crore would be submitted to the Cabinet Committee on Foreign Investment (CCFI) for decision. 

* The FIPB was transferred to the Department of Economic Affairs; Ministry of Finance.The levels of approvalwere essentially retained, except to the extent that recommendations of FIPB for project-proposals involving a total investment of less than Rs 600 Crore would be considered and approved by the Finance and Company Affairs Minister and those with a total investment beyond Rs 600 Crore would be submitted to the Cabinet Committee on Economic Affairs for decision.