The Union Cabinet on Wednesday approved winding up of the 25-year-old Foreign Investment Promotion Board (FIPB), which has been vetting foreign direct investment (FDI) proposals requiring government approval, and it will be replaced by a new mechanism.
Finance Minister Arun Jaitley in his Budget speech on February 1 had announced the scrapping of the inter- ministerial body, which comes under the ministry’s Department of Economic Affairs.
This is the latest in a series of steps taken aimed at attracting more FDI. The FIPB was set up under the Prime Minister’s Office soon after India embarked on its first market reforms in 1991, in a departure from decades of socialist planning.
The decision to abolish the FIPB was taken by the Cabinet, chaired by Prime Minister Narendra Modi, Jaitley said while briefing the media after the meeting.
The FIPB will be replaced by a new mechanism under which the proposals will be approved by the ministries concerned as per the standard operating procedure approved by the Cabinet, he added.
Jaitley further said that proposals in sensitive sectors will require the home ministry’s approval.
On the proposals pending with the FIPB, he said they will go back to the ministries concerned.
Currently, only 11 sectors, including defence and retail trading, require government approval for FDI.
Jaitley said that about 91-95 per cent of FDI proposals are under the automatic route.
There could also be a provision for quarterly review of pending proposals by the economic affairs secretary and annual review by the finance minister.
The FDI proposals above Rs 5,000 crore would continue to be cleared by the Cabinet Committee on Economic Affairs (CCEA).
The inflow of FDI into India increased by 9 per cent to $43.48 billion in 2016-17.