The union cabinet on Wednesday approved the abolition of the 25-year-old Foreign Investment Promotion Board (FIPB), which currently processes FDI proposals requiring government approval.
The union cabinet chaired by Prime Minister Narendra Modi has given its approval to the phasing out of FIPB and allowing administrative ministries/departments to process applications for FDI requiring government approval.
Henceforth, the work relating to processing of applications for FDI and approval of the government thereon under the extant FDI policy and FEMA, shall now be handled by the concerned ministries/departments in consultation with the Department of Industrial Policy and Promotion (DIPP), a government release stated.
Ministry of commerce will issue the Standard Operating Procedure (SOP) for processing of applications and decision of the government under the extant FDI policy, the release added.
Currently, FDI in 11 sectors including defence and retail trading requires government approval.
FIPB will be replaced by a new mechanism under which the proposals will be approved by the ministries concerned as per the standard operating procedure approved by the Cabinet, finance minister Arun Jaitley said.
Jaitley further said that proposals in sensitive sectors will require the home ministry's approval.
On the proposals pending with FIPB, he said they will go back to the ministries concerned.
There could also be a provision for quarterly review of pending proposals by the economic affairs secretary and annual review by the finance minister.
The FDI proposals above Rs5,000 crore would continue to be cleared by the Cabinet Committee on Economic Affairs.
Inflow of foreign direct investment into India increased by 9 per cent to $43.48 billion in 2016-17.
The move will promote ease of doing business and foreign investors will find India a more attractive destination, resulting in increased inflow of FDI while also promoting the principle of maximum governance and minimum government.
At present, FDI applications are considered by FIPB in the Department of Economic Affairs (DEA), under the ministry of finance comprising of various secretaries of various government departments making recommendation on FDI applications. After the cabinet decision, it would be handled independently by administrative ministries depending on the industry sector.