The Foreign Investment Promotion Board (FIPB) was a national agency under the Government of India that offered a single window clearance for FDI applications which did not come under the automatic route. It was under the Ministry of Finance and the Finance Minister was in charge of the FIPB. In May 2017, the Union Government decided to phase out the FIPB and it was abolished as announced by the Union Finance Minister Mr Arun Jaitley in the 2017-18 budget speech in the Parliament.
Before it was abolished, the FIPB was the most important body for FDI approvals as it could consider applications below Rs.3000 crore. Above this amount, the Cabinet Committee on Economic Affairs considered the application for FDI.
The body was first established in the nineties after the government initiated economic liberalisation reforms.
FIPB held its last meeting on 17th April 2017.
- FIPB Chairman: Secretary of the Department of Economic Affairs, Ministry of Finance
- Secretary of DIPP
- Secretary of the Department of Commerce
- Secretary of Economic Relations
- Secretary of the Ministry of External Affairs
- Secretary of the Ministry of Overseas Indian Affairs
- The board could co-opt secretaries to the GOI and prominent officials of banks, financial institutions, and experts in commerce and industry, on a need basis.
The FIPB performed the following functions before it was abolished:
- Quickly approve FDI proposals.
- Review FDI policies and help set up transparent guidelines that encourage FDI into different sectors.
- To examine the implementation of the various proposals that it had approved.
- To encourage FDI into the country by establishing contracts with international companies and inviting them to make investments in India.
- To communicate with the government and industry to augment the inflow of FDI into the country.
- To identify other sectors that need FDI.
India’s opening up of many sectors for foreign companies to start a business in India reduced the utility of FIPB. After the abolishing of the Board, individual departments of the government have the authority to clear FDI proposals in consultation with the DIPP which will also issue the standard operating procedures for processing applications.
The basic reason behind the replacement of the FIPB is to increase the transparency and speed up the clearance procedure in the FDI proposals so that FDI inflow can be increased in the country.
After the abolition of the FIPB now individual departments of the government have been empowered to clear FDI proposals in consultation with Department of policy and Promotion (DIPP) which will also issue the Standard Operating Procedures (SOPs) for processing applications.
Now timeline will be fixed for approving FDI proposals by the competent authorities. The rejection of the application is made tougher as it will now mandatorily require concurrence of DIPP.
As per new procedure the Ministry of Home Affairs is entitled to give nod if the FDI application comes from Pakistan and Bangladesh and FDI proposals require approval by the private security agencies and manufacturing of small arms take place.
This move is seen as a simplification of the existing procedure to provide speedy clearance to FDI proposals. Although experts have also raised doubts whether line ministries are equipped to take such decisions speedily.