One of the major announcements in Finance Minister Arun Jaitley’s Budget speech was the abolition of the FIPB in order to further liberalise policies related to foreign direct investment.
Foreign Investment Promotion Board (FIPB) was formed as a beacon of the economic liberalisation of 1993. The 1993 round of reforms under the P.V. Narasimha Rao regime, for the first time, threw the doors open to foreign investors.
The board has offered a single window clearance for applications of prospective foreign investors in sectors falling in the approval route. The board has handled investment proposals worth up to Rs. 5,000 crore.
According to government rules, foreign investments in sectors under the automatic route do not require prior approval from the FIPB and are subject to sectoral rules.
Reason for phasing out FIPB
More than 90% of the total FDI inflows are now through the automatic route. “We have now reached a stage where FIPB can be phased out. We have therefore decided to abolish the FIPB in 2017-18,” Mr. Jaitley said. A roadmap for its abolition is to be announced in the next few months.