Modi Government abolishes 25 year old FIPB; approves new mechanism for FDI proposals

The Cabinet today approved dismantling of the two-decade-old Foreign Investment Promotion Board (FIPB) and defined a new mechanism to approve overseas investment applications and hasten fund flows.

FIPB, an inter-ministerial body, is the current nodal agency responsible for the processing of foreign direct investment (FDI) proposals.

The responsibility of handling FDI proposals will now be left only to a single ministry and the concerned sector regulator to handle foreign investment in sectors that need government nod. The move will avoid the need for multiple clearances.

In the last three years, more than 90 percent of the total FDI inflows poured in through the automatic route, while FIPB or Cabinet approval is required for 11 sectors, Finance Minister Arun Jaitley said today.

“In some cases, there would be security concerns. Home ministry will give approval in these cases,” he said.

According to the new mechanism, investment proposals will be handled in consultation with Department of Industrial Policy and Promotion (DIPP), which will issue standard operating procedure for processing of applications.

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In Budget 2017-18, Jaitley had announced government’s intent to abolish the FIPB and replace it with a new system as part of the government’s broader strategy to ease FDI rules, remove procedural delays and the turn India into a global investment hotspot.

The Centre is trying to promote more foreign inflows in the country and winding up of FIPB would further improve "ease of doing business".