Study Material | Test Series
Drishti IAS
call1800-121-6260 / 011-47532596
Drishti The Vision Foundation
(A unit of VDK Eduventures Pvt. Ltd.)
mains Test Series 2018
Q. Abolition of FIPB: Discuss the issue of proposed abolition of the Foreign Investment Promotion Board.
Feb 08, 2017 Related to : GS Paper-3

Ans :

Introduction-

In budget 2017 speech union finance minister announced the abolition of The Foreign Investment Promotion Board (FIPB), a body that clears proposals envisaging foreign investment up to Rs 5,000 crore.

What is FIPB-?

The FIPB is a national agency of Government of India, with the remit to consider and recommend foreign direct investment (FDI) which does not come under the automatic route. It used to act as a single window clearance for proposals on FDI in India. The FIPB is comes under the Department of Economic Affairs, Ministry of Finance.

Why government wants abolish-?

  • Over 90% of the foreign direct investment (FDI) is coming through automatic route. In such cases FIPB has no significant role. 
  • In case of FDI under approval rout, FIPB offers a single window clearance. The sectors under automatic route do not require any prior approval from FIPB and are subject to only sectoral laws. Over the years, increasing liberalisation of the country’s FDI regime has resulted in more and more FDI through the automatic route. 
  • The FIPB has lost its erstwhile pre-eminence and the discretionary power with its bureaucrats doesn’t inspire much confidence within foreign investors. Hence government wants to abolish it. 


What’s next-?

  • In a advanced countries there are some institutional mechanisms to block any foreign investment proposal that hurts national interest and security, hence India also need an agency for institutional safeguards. 
  • In such cases Reserve Bank of India is best placed to check any investments which pose threat for national interest and security.
  • Hence government should enact a law to give the RBI powers that go beyond collection of information to refer proposals for vetting for possible security implications to relevant ministries of the Union government.


Conclusion-


In current liberalised era most of the FDI comes from automatic route and sectoral regulation has also become far more robust, obviating the need for the board that was set up in early 1990s. Hence the government has made right thing by proposing the abolition of FIPB. But like developed countries we need institutional safeguards to block investments which may pose threat for national security and interest and RBI is best suited to deal with such cases.


Helpline Number : 87501 87501
To Subscribe Newsletter and Get Updates.