Union Cabinet Approves Abolition of FIPB

The Union Cabinet has approved the abolition of 25 year old FIPB. Henceforth, concerned ministries will be responsible for direct approval of foreign investment proposals. The decision falls in line with Finance Minister Arun Jaitley’s proposal to scrap FIPB in this year’s Union Budget.
FIPB was constituted in the mid-nineties under the Prime Minister’s Office following economic liberalisation.

Rationale

Over 90% of the FDI inflows in value terms enters through automatic route. The government expects that scrapping of FIPB would help in ease of doing business. At present, only 11 sectors, including defence and retail trading needs government approval for foreign direct investment (FDI).

New Mechanism

FDI proposals would be approved by the ministries concerned by following the standard operating procedure approved by the Cabinet. Those 11 sectors that require approval would be dealt directly by the concerned ministry.
In proposals related to security, the proposals will also need to require the approval of Home Ministry.
Those proposals which are presently pending before the FIPB will be sent back to the ministries concerned.
The FDI proposals above Rs 5,000 crore will continue to come under the purview of the Cabinet Committee on Economic Affairs (CCEA). 

Month: Current Affairs - May, 2017