DIPP refuses FinMin’s request to review new FDI norms

The face-off between the Finance and the Commerce and Industry Ministry seems to be escalating. A few days after the Finance Ministry had raised objections, certain key provisions of the new foreign direct investment (FDI) norms, the Department of Industrial Policy and Promotion (DIPP) has flatly refused any review of the new FDI guidelines. The two ministries are scheduled to meet in early May to try and sort out their differences.

CNBC-TV18's Abhijit Neogy finds why why the Finance Ministry has these objections and why the DIPP doesn't want to give in for the review?

Also Read: New foreign investment rules: Progressive or Regressive?

Here is a verbatim transcript of Abhijit Neogy's comments on CNBC-TV18. Also watch the accompanying video.

The DIPP says that at every stage, right from the drafting stage onwards, there were inter-ministerial consultations held and the Department of Economic Affairs (DEA) has actually raised objections to the FDI guidelines was consulted and was therefore in the loop and now it's just woken up late.

The DIPP has ruled out any kind of comprehensive review of the FDI guidelines, it says that if their clarifications, which were sort both by the Reserve Bank of India (RBI) and the finance industry and those clarifications have been given there in one round of meetings between these two ministries, the DIPP and DEA in early May to iron out the glitches.

The RBI has not yet operationalised yet so unless that is done under SEMA, FDI guidelines cannot come into force, the RBI is also wanting some more clarifications, what we do understand is that the Finance Ministry essentially wanted to know that the insensitive sectors like insurance.

It wanted to know if the new guidelines constitute a bypassing of the existing sectoral caps and also if this relaxation isn't intentional on the part of DIPP, it's the intention essential to liberalize it to go in for random liberalization of the rule across all sectors if that is the case then the DIPP should come clean.

DIPP has told CNBC-TV18 if the intention was actually to go with liberalization to the FDI, they would have actually come up and announced it and the idea was that India Inc was crammed for FDI room and the proportional rule was something that India Inc was not comfortable with. It was a constraint for capital and therefore these norms were revised and they have been maintaining that they have RBI and DEA on board and therefore are not open to a comprehensive view.

But yes if in certain cases, if the DEA and RBI can show that there could be some bypassing and if there are loop holes then the DIPP would definitely correct that. But barring that, they have ruled out a comprehensive review of the FDI norms.