Govt abolishes FIPB

In fresh outreach to foreign investors, Finance Minister Arun Jaitley announced that the Foreign Investment Promotion Board (FIPB), is being abolished.

An agency often criticized for red tape, FIPB , which is under the finance ministry since 2003, was initially constituted under the Prime Minister's Office during the economic liberalisation  of the early 1990s. Jaitley said since India announced sweeping reforms to rules on foreign direct investment (FDI), with much easier terms for investors in sectors ranging from civil aviation to pharmaceuticals in the last two years, the role of the body is now minimised. 

"More than 90% of the total FDI inflows are now through the automatic route.  FIPB has successfully implemented e-filing and online processing of FDI applications and now reached a stage where it can be phased out. Therefore, FIPB will be abolished in 2017-18," he said.

FIBP has been clearing applications for up to Rs. 5,000 crore for direct investment by outside investors. "Today, some sectors in India do not need clearances in advance from the government or the Reserve Bank of India. This applies to areas where 100% FDI is allowed- the company can be owned entirely by the foreign investor," he said at a news conference later. FIPB handled those projects that need government approval in sectors like banking, defence and civil aviation. "FDI guidelines will be further relaxed in the coming year."

The PM is keen for quick steps for realising his government's ambitious project "Make in India" to making the country "the most open economy in the world for FDI." According to the government, FDI increased by 30% about $22 billion during April-September last year.

Meanwhile, Congress and CPI(M) have slammed the Modi government for the proposal to wind-up the FIPB saying the move would threaten the domestic industry. Senior Congress leader Anand Sharma said the shutting down of the FIPB would give overseas investors unregulated access to Indian markets which would prove detrimental to the Indian industry.

The Congress leader contended that the Indian pharma industry was already feeling the heat as it was open to acquisition by multinationals. CPI(M) General Secretary Sitaram Yechury said FIPB was not just to attract foreign investments but also acted as a regulator.

“Now by removing the regulator, the government is allowing FDI increasingly through the automatic route. There will be no further regulation of foreign capital,” he said.

Yechury said the listing of PSUs in foreign stock exchanges would lead to trading of their stocks by FIIs and therefore, sale of the state-run bodies to foreign entities.