The Union Cabinet on Wednesday approved the winding up of the 25-year-old Foreign Investment Promotion Board (FIPB), which currently vets FDI proposals requiring the government approval. Finance Minister Arun Jaitley in his Budget speech on February 1 announced scrapping of the inter-ministerial body, which comes under the finance ministry’s Department of Economic Affairs.
The FIPB was initially constituted under the Prime Minister’s Office in the wake of economic liberalisation in the early 1990s. Currently, FDI in 11 sectors including defence and retail trading requires government approval. As per the proposed mechanism, respective ministries would take care of the FDI proposals going forward.
Last month finance minister Arun Jaitley had said, “With the government easing the process of doing business by eliminating discretion and adopting market mechanism for allocation of resources, the industry does not have to visit corridors of power anymore. And in that series of reforms, efforts are being made to simplify direct and indirect tax structure.”
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“(In) the entire effort to simplify both direct and indirect tax structure, some tough steps are required to see that India increasingly becomes a tax-compliant society,” he said without elaborating. Jaitley added that higher resources with the state will now mean greater investment in infrastructure and rural India. “These are going to be the two primary drivers of growth,” he said.
Sources added that the government is considering to come up with a standard operating procedure for clearance of FDI proposals in these 11 sectors.
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.
Inflow of foreign direct investment into India increased by 9% to $43.48 billion in 2016-17.