On Tuesday the union cabinet has approved the dissolution of foreign investment proposal board that was initially constituted under the office of Prime Minister in the wake of economic liberalization that took place in the early 1990s. Existing since 25 years the board was responsible for processing proposals of foreign direct investment (FDI) and further making recommendations for government approval.
The abolition of FIBP was highlighted by the finance minister of India in his budget 2017 speech. The government had undertaken some substantive reforms in the policies of FDI during the last two years which has liberalized FDI investment and has simplified the rules remarkably. As a result of this around 90% of the FDI inflows are now following an automatic route. Abolishing FIPB at this stage careful and bold step and will further help streamline the process for foreign investment in India, which is much needed. This bold step without any doubt will make easier for the foreign investors to invest in India.
The final decision to abolish FIBP was taken by the cabinet, chaired by the Prime Minister of the country. It is announced by Arun Jaitley, the finance minister of India that the foreign investment proposal board will be replaced by a new mechanism under which the proposals will be approved by the ministries concerned adhering to the standard operating procedure approved by the Cabinet. He further added that certain proposals which fall under sensitive sectors will require the home ministry’s approval and the pending proposals with FIPB, will go back to the ministries concerned.
Another provision is also expected for reviewing the pending proposals by the economic affairs secretary quarterly and by the finance minister, annually. The proposals by FDI above Rs 5,000 crore would continue to be cleared by the Cabinet Committee on Economic Affairs. Inflow of foreign direct investment into India has increased by 9% to $43.48 billion in 2016-17.