In a major decision aimed at further easing doing business in India, the Union Cabinet on Wednesday abolished the 25-year-old Foreign Investment Promotion Board (FIPB), obviating the need for prior clearance for Foreign Direct Investment in more than 90 per cent cases. Industry lauded the move as a "bold" step that would add to the healthy inflow of foreign investment.
Announcing the decision, Finance Minister Arun Jaitley told reporters in New Delhi that after Wednesday's move, only 11 sectors would require prior approval for Foreign Direct Investments (FDI).
"The cabinet today (Wednesday) took the important decision of abolishing the FIPB," Jaitley told reporters after the cabinet meeting. He said this was done to further ease doing of business in the country.
Explaining the rationale behind the decision, the Minister said that after the liberalisation of FDI rules, 91-95 per cent of FDI was coming in anyway through the "automatic" route, without needing FIPB clearance.
The Union Budget 2017-18 presented in February had announced the proposal for abolition of FIPB.
He also said that in the case of the 11 sectors that need prior approval for FDI, these would now be given by the ministries concerned. Wherever there are security considerations, the Home Minister's approval would also be taken, he added.
Asked about how long the process of abolition would take, Jaitley said this would be done expeditiously. Cases pending for approval with the FIPB would now be taken up by the respective ministries, the Finance Minister clarified.
The FIPB was set up in the early 1990s as an inter-ministerial single-window for allowing FDIs that need government approval.
The government relaxed FDI norms in June 2016 in single brand retail, civil aviation, airports, pharmaceuticals, animal husbandry and food products, whereby investors in these sectors do not need to seek approval from the FIPB.
The Confederation of Indian Industry (CII) welcomed the decision as a "bold step" that "would streamline the process of FDI approvals and thereby boost FDI flows into the country, adding to growth and employment."
"Already, the government has among the most liberal FDI regimes in the world, which has greatly improved the investment climate. As a result, for the last three years, FDI has been on the ascendant and is setting new records," CII Director General Chandrajit Banerjee said in a statement in New Delhi.