India is having a well-designed Foreign Direct Investment regulation regime. FDI is regulated through various norms. A minimum lock in period, minimum capital for investment, sectoral limits and most importantly regulation of entry into approval/automatic route are the important regulations.
In the case of entry regulations, FDI entry is made under two categories – automatic route and approval route. Approval from the government is mandatory for some type of investment. For this, approval institutions/bodies are created. The Foreign Investment Promotion Board is the most important approval body as it can consider FDI below Rs 5000 crore. Above this amount, the Cabinet Committee on Economic Affairs is the approval authority.
What is FIPB?
The FIPB (Foreign Investment Promotion Board) is the designated institution which considers the FDI proposals that require government approval. It also grants composite approvals involving foreign investment/ foreign technology. FIPB is located in the Department of Economic Affairs, Ministry of Finance and the Finance Minister is in charge of the FIPB. As per the June 2016 FDI policy revision, the FIPB can give recommendations of FDI proposals below Rs 5000 crore to the Minister of Finance for consideration. As most of the FDI proposals are below Rs 5000 crore, it is well understood that almost all FDI proposals are examined by the FIPB.
Constitution of FIPB
Though the FIPB is situated in the Ministry of Finance, it comprises of the Secretaries of main Ministries of Government of India. The Secretary of Department of Economic Affairs, Ministry of Finance will be the Chairperson of the FIPB. Secretaries of DIPP, Department of Commerce (both in the Ministry of Commerce and Industry), Secretary of Economic Relations, Ministry of External Affairs, and Secretary of Ministry of Overseas Indian Affairs are members of FIPB.
What are the functions of the FIPB?
- To quickly approve the foreign investment proposals
- Ta review the FDI polices and to communicate with other agencies such as the Administrative Ministries in order to set up guidelines that are transparent and which encourage FDI into the various sectors.
- To look over the implementation of the various proposals those have been approved by it.
- To take up such activities that encourage FDI into the country such as establishing contracts with international companies and also inviting them to invest in India.
- To communicate with government, non-government and industry in order to increase the flow of FDI onto the country.
- To identify the various sectors that requires FDI.
The Board would be able to co-opt other Secretaries to the Central Government and top officials of financial institutions, banks and professional experts of Industry and Commerce, as and when necessary.