NEW DELHI: As part of its policy to provide greater ease of doing business by simplifying procedures and to make India an attractive investment destination, the government has approved the phasing out of the Foreign Investment Promotion Board (FIPB).
The Union Cabinet, chaired by Prime Minister Narendra Modi, cleared a proposal to this effect on Wednesday.
In a briefing after the Cabinet meeting on Wednesday, Finance Minister Arun Jaitley said that FIPB would be replaced by a new mechanism under which foreign direct investment (FDI) proposals will be cleared by the ministries concerned as per the standard operating procedure approved by the Cabinet.
Currently, only 11 sectors, including defence and retail trading, require government approval for FDI.
Foreign investment proposals which do not require the approval of the government will continue to be processed under the automatic route. According to Jaitley, bulk of the FDI proposals will come under the automatic route.
“Foreign investors will find India a more attractive destination and this will result in more inflow of FDI. The move will provide ease of doing business and will help in promoting the principle of Maximum Governance and Minimum Government,” a government release said.
The intent to abolish FIPB was first announced by the finance minister in his Budget speech on February 1. Investments in sensitive sectors will need the home ministry’s approval, Jaitley said.
In FY17, the FDI inflow into India was $43.48 billion in 2016-17.
FIPB, which has been vetting FDI proposals under the government approval route for the past 25 years, was set up as an inter-ministerial body under the Department of Economic Affairs, Ministry of Finance, comprising various secretaries of Government of India who give recommendation on FDI applications. It was constituted under the Prime Minister’s Office following economic liberalisation in the early 1990s.