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Cabinet gives nod to abolish FIPB to boost FDI inflow

25 May 2017 Evaluate

In a move to facilitate ease of doing business and easing the flow of foreign capital into the country, the Union Cabinet led by Prime Minister Narendra Modi has approved the abolition of the 25-year-old Foreign Investment Promotion Board (FIPB). The FIPB, which was earlier vetting FDI proposals and requiring Government approvals, will now be replaced by a new mechanism under which the proposals will be approved by the concerned ministries.

Finance Minister Arun Jaitley has said that the decision to abolish the FIPB meant that around 90% of foreign direct investment (FDI) would be automatically approved. However, he noted that there are still 11 sectors including defence and retail trading where government approval for FDI is required. Therefore, he explained that in the case of the 11 sectors that need prior approval for FDI, these would now be given by the ministries concerned and added that wherever there are security considerations, the Home Minister’s approval would also be taken.

In Budget 2017-18, Jaitley had announced scrapping of the FIPB — an inter-ministerial body under the finance ministry’s Department of Economic Affairs that processes FDI proposals and makes recommendations for government approval. The FDI proposals above Rs 5,000 crore would continue to be cleared by the Cabinet Committee on Economic Affairs. Inflow of foreign direct investment into India has been increased by 9 per cent to $43.48 billion in 2016-17.

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