FIPB Abolition

What necessitated dismantling of FIPB?
  • A person filling a proposal for the FIPB’s consideration had to provide some 18 documents duly filled and presumably in duplicates and triplicate. In any case, it was also getting redundant with more than 90-95 per cent of investment coming in through the automatic route.
  • FIPB was among the last remaining controls in an era of reforms. It acted more like a middleman and was made up of five secretaries and discussed FDI proposals with several ministries.
  • The government believes that once the Board is history, red-tapism will shrink, ease of doing business will improve and investors will find India more attractive.
What next?
The Department of Industrial Policy and Promotion under the Commerce Ministry is now expected to formulate a standard operating procedure to process foreign direct investment applications in 11 sectors that are still not in the automatic FDI approval list. The department would have to be consulted by line ministries, which have been empowered to take ‘independent’ decisions on investments proposed in their domains.
Other areas that need attention:
  • 90% of FDI was already under automatic route and did not require FIPB approval.
  • Individual ministries will have to take decisions now. FDI approval speed depends on them now.
  • Cumbersome rules still remain for ex.
      • Global insurers can hold up to 49% ownership in Indian ventures but only if Indians retain management and control over these entities. It is not likely and hence has attracted less FDI.
      • Despite allowing 100% FDI in food retail, rules prohibit foreign players from using a small fraction of their shelf space for non-food items, affecting investment plans. This, in a sector that can create millions of jobs and boost farm incomes.
  • On the other hand, archaic land acquisition and labour laws continue to make it difficult for large factories to come up

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