Modi Government Proposes Dismantling of Foreign Investment Promotion Board

In a path breaking move, the Union Cabinet today approved the dismantling Foreign Investment Promotion Board (FIPB). The Board was created about 25 years back when India was opening up its doors for Foreign Investment in India. Any Foreign Investment was required to be approved by the FIPB, which often led to delays and frustration. However, with the gradual relaxation in the procedures and also allowing Foreign Investment in almost every sector, it was felt that FIPB had become redundant. With the proposed scrapping of FIPB, the Government of India would remove one layer of decision making for FDI approvals.


FDI proposals will now be cleared by the concerned ministries and in cases where government has security concerns the matter will also be approved by the home ministry. Any Foreign Investment above Rs 5,000 crore would be cleared by the Cabinet Committee on Economic Affairs.

More than 90 per cent of FDI inflows are through the automatic route. India recorded the highest ever foreign direct investments in a year in 2016-17 at $43 billion up 9 per cent over last year. The move to phase out the FIPB is to make India an attractive destination for investment and increasing FDI inflows by providing greater ease of doing business and promoting the ‘Maximum Governance and Minimum Government’ principle. The proposal entails abolishing the FIPB and allowing administrative Ministries/Departments to process applications for FDI requiring government approval.

The Roadmap and timeline is yet to be given however it appears that Fresh Proposals would not require to go through the grind of FIPB submission and approval. The statement issues today states that “Henceforth, the work relating to processing of applications for FDI and approval of the Government thereon under the extant FDI Policy and Foreign Exchange Management Act, shall now be handled by the concerned Ministries/Departments in consultation with the Department of Industrial Policy & Promotion (or the DIPP, in the) Ministry of Commerce, which will also issue the Standard Operating Procedure for processing of applications and decision of the Government under the extant FDI policy.”

Tags:FIPB, Foreign Investment Promotion Board, Foreign Investment in India, Cabinet Committee on Economic Affairs