The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval to the phasing out of the Foreign Investment Promotion Board (“FIPB”). FIPB was an inter-ministerial body under the finance ministry’s Department of Economic Affairs that processed FDI proposals and made recommendations for government approval. It was set up after India embarked on its first market reforms in 1991 and was initially constituted under the Prime Minister’s office and subsequently shifted under the Department of Economic Affairs in the Ministry of Finance. FDI proposals up to Rs. 5,000 crore were cleared by the FIPB. However, proposals above Rs. 5,000 crore would go to the Cabinet Committee on Economic Affairs.
After the liberalisation of FDI Policy since 2014, 90% of FDI was coming in via the automatic route, without the need for FIPB clearance, thus the move to phase out the FIPB is an administrative clean-up aiming to promote the principle of ‘Maximum Governance and Minimum Government’ by removing repetitive steps for approval and ensuring that investors deal with a single authority and providing greater ease of doing business.
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