FIPB scrapped, what next?

In a few weeks the 25-year-old Foreign Investment Promotion Board that came into existence when the economy was liberalised, will cease to exist. This could not have come at a more opportune time. With the rest of the world turning protectionist, India needs to remove the vestiges of impediments to inflow of capital. India is the fasted growing economy in the world even if its growth has slowed down at the moment. It is also the largest receiver of foreign investment among emerging markets, so it is necessary to facilitate investors who want to invest in India. However, there must be a mechanism to see that investment comes into sectors where it is needed like in research, engineering and IT and not only in sectors that are profitable for the investors. FIPB was among the last remaining controls in an era of reforms. It acted more like a middleman and was made up of five secretaries and discussed FDI proposals with several ministries.

It seems more logical if the ministries take decisions directly on proposals concerning their ministry. A person filling a proposal for the FIPB’s consideration had to provide some 18 documents duly filled and presumably in duplicates and triplicate. In any case, it was also getting redundant with more than 90-95 per cent of investment coming in through the automatic route. The dismantling will also reduce the government’s administrative expenditure and add to the ease of doing business. One has, of course, to wait and see what guidelines the DIPP brings in its place.