by Rashmi Singh and Tanika Chandna
In the 2017-18 budget session, the Finance Minister, Arun Jaitley proposed the abolition of Foreign Investment Promotion Board (FIPB) and promised to roll out a new system for facilitating FDI proposals.
FIPB was a 25-year-old inter-ministerial body housed in the Department of Economic Affairs which was first constituted under the Prime Minister office during the process of economic liberalisation in the early 1990s. Its responsibility was to processing Foreign Direct Investment (FDI) proposals and recommending approval to the Finance Minister and to the Cabinet Committee on Economic Affairs, if the investment amount exceeded Rs 3,000 crore. Its functioning was improved by developing an upgraded and secure portal for e-filings of FDI applications which made the process of application simpler, accessible, transparent, and paperless
The reason cited for its abolition was the ‘successful implementation e-filing and online processing of FDI applications and that over 90% of FDI was coming through the automatic route which did not require the prior approval from FIPB. For, the remaining FDI inflows, every division concerned has a regulator for it, hence the government approved of its winding up. Subsequently, the work of granting approval under the Foreign Exchange Management Act (FEMA) and FDI policy was vested with the concerned ministries or departments.
Pursuant to the abolition, a Standard Operating Procedure was issued by the government for processing the FDI proposals which can be filed on a revamped FIPB portal, renamed as ‘Foreign Investment Facilitation Portal’.
According to Economic Times news report published dated 1st July, 2018 that relied on data of the Department of Industrial Policy and Promotion (DIPP), inflows growth rate recorded five-year low of 3 % at 44.85 billion USD in 2017-18. According to the report, FDI in 2017-18 grew by only 3 per cent to USD 44.85 billion. Foreign inflows in the country grew by 8.67 per cent in 2016-17, 29 per cent in 2015-16, 27 per cent in 2014-15, and 8 per cent in 2013-14, clearly a declining trend.
Further, the FDI fell 11% to 22.66 billion during April-September 2018-19, as per Economic Times news report dated February 4, 2019.