Finance Minister Arun Jaitley also promised to liberalise FDI policy in more sectors.
In order to further improve ease of doing business, the government decided to abolish FIPB on Wednesday and form a new mechanism that could include approvals by the ministries concerned for expeditious clearance of foreign investment proposals. Finance Minister Arun Jaitley also promised to liberalise FDI policy in more sectors.
"We have now reached a stage where FIPB can be phased out. We have therefore decided to abolish the FIPB in 2017-18. A roadmap for the same will be announced in the next few months. In the meantime, further liberalisation of FDI policy is under consideration and necessary announcements will be made in due course," he said while presenting Union Budget 2017-18.
He said that over 90% of the total FDI is coming through automatic route and only 10 per cent has to go through the Foreign Investment Promotion Board (FIPB).
Later, briefing media, he said some alternative mechanism could be in place. "In many cases, it could be also though parent ministry which deals with particular investment. Today you go through two different ministries and both follows the same set of considerations. Therefore FIPB going out and the concerned ministry dealing with it is one possible mechanism," he said.
Experts said that the proposal is likely to reduce M&A timelines. E&Y India said the announcement should make FDI though the approval route a smoother process especially benefiting single and multi brand retail trading.
Currently, FIPB offers single-window clearance for applications on FDI in India that are under the approval route. The sectors under automatic route do not require any prior approval and are subject to only sectoral laws.
FIPB was initially constituted under the Prime Minister's Office (PMO) in the wake of the economic liberalisation drive of the early 1990s.
The Board was reconstituted in 1996 with transfer of the FIPB to the Department of Industrial Policy and Promotion (DIPP). It was again transferred to the Department of Economic Affairs, under the Ministry of Finance, in 2003.
FDI into the country increased by 30% to US $21.
62 billion during April-September this fiscal. Last year, the government relaxed FDI policy for several sectors including defence, civil aviation and stock exchanges.
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