The proposal to shave off another part of the current mandate of the Foreign Investment Promotion Board (FIPB), by restricting its jurisdiction to fresh foreign direct investment proposals, should gladden all those who complain of an India slowly tugging back its red carpet if not exactly cranking back the drawbridge. The measure would offer relief to investors keen on scaling up existing operations or extending their presence in India quickly as market conditions change. So long as the ratio of foreign investments is below the specified norm, they would be allowed to simply go ahead without having to hold parleys with the FIPB. Ongoing investments are a routine matter in any project, and it makes little sense to micromanage issues that do not infringe existing norms. Moreover, any move that enables business decisions to be taken with a greater degree of dynamism, thus making space for market efficiency through a swifter addressal of demand, is welcome. In fact, the sooner the FIPB is replaced with a regular investment promotion board, neutral with respect to the colour of money being invested, the better.
Thankfully, the automatic FDI approval route has already made the FIPB irrelevant in several fields of business. From a high of more than three-fourths in the mid 1990s, the proportion of FDI money flowing in through the FIPB route has fallen to about one-tenth last year. Figures for the first four months of the current fiscal year show that the automatic route continues to swell. By this, investors need only notify the central bank within 30 days of making such investments, and assure it that all sectoral norms have been adhered to. The FIPB, meanwhile, has prevailing jurisdiction over the few sectors which still require industrial licenses, apart from over-24% equity investments in businesses reserved for small scale industries and some other forms of investment. Importantly, the FIPB still serves as the primary contact point for large investors in major long-gestation projects, and care must be exercised that the new board does not act at cross-purposes with other agencies in operation, such as the Foreign Investment Implementation Authority (FIIA), which proactively steps in to help investors with operational assistance, including the securing of state level clearances. A single consolidated agency makes more sense. Turf battles on FDI would do nobody any good.
