The government has officially abolished the Foreign Investment Promotion Board (FIPB), three months after Finance Minister Arun Jaitley announced the move in his annual Budget in February. It released an official circular on June 5, 2017, stating the same.
While most foreign investment proposals will be taken up by individual ministries and concerned departments of the government, for trading in single, multi-brand and food products retail, matters will now go to the DIPP, ministry of commerce & industry. For financial services not regulated by a regulator or where there is more than one regulator, matters will be taken up by the department of economic affairs that is under the ministry of finance. For banking (both private and public), the ministry of finance will be responsible, wherein proposals will go through the department of financial services.
“With FIPB getting abolished, it is expected that foreign investment proposals will be considered by the concerned ministry in consultation with the DIPP. Towards this end it is hoped that DIPP comes out with clear guidelines and operating procedures defining the parameters that should be considered for clearance of proposals. This is needed to ensure that there is alignment in the approach of different ministries,” said Radhika Jain, director, Grant Thornton Advisory Private Limited.
Currently, there are about 4,500 files with the FIPB Secretariat. “These files are important from the point of view of reference, record and examination by investigating agencies, etc. These files are permanent in nature and shall be transferred to the concerned ministry/department by the FIPB Secretariat,” the recent circular released by the government said. Gokul Chaudhri, Leader, Direct Tax, BMR & Associates LLP says: “The go forward framework empowers the administrative ministry involved with the given sector to approve their respective sectoral proposals, with Department of Industrial Policy and Promotion being a facilitative body to define and streamline the process and resolve gaps. This development recognizes that the Government that India is now comfortable that its foreign investment norms are liberal and do not require an inter-ministerial forum for clearance. The administrative ministries, now empowered, will hopefully accelerate the red carpet for foreign investment proposals, and the Cabinet Committee will continue to limit the sectors and circumstances wherein foreign investment needs vetting by the administrative ministries.”
FIPB was the inter-ministerial body responsible for processing of FDI proposals in the country across diverse sectors. Its abolition will set the stage for more reforms and promote inflow of FDI in the country as most FDI inflow takes place through the automatic route, the top brass of the government have opined.
NITI Aayog Chief Executive Amitabh Kant had in February said receipts of FDI in India have gone up significantly over the last two-and-a-half years. It has grown by 60 percent, while globally it has come down by 16 percent.
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