INDIA: Government Approves Proposal for Abolition of the Foreign Investment Review Board

On 24 May 2017, The Indian Government approved the phasing out of the 25-year-old Foreign Investment Promotion Board (FIPB). The FIPB is a single window clearance mechanism for applications on foreign direct investment (FDI) in India in sectors under the government approval route.

The proposal entailed abolishing the FIPB and allowing administrative Ministries/Departments to process applications for FDI requiring government approval. Justifying the abolition of the FIPB, the Government stated that at the time 91-95% of FDI inflow happens through the automatic route and that there were only 11 sectors (including defence and retail) requiring government approval.

The proposal for abolition of the Foreign lnvestment Promotion Board (FIPB) has now been approved by the Government.

The proposal, as approved by the Government, envisages, among other changes:

The eleven notified sectors/activities requiring government approval will require approval from the following respective Administrative Ministry/ Departments:

• Financial Services: Department of Economic Affairs, Ministry of Finance;
• Banking: Department of Financial Services, Ministry of Finance;
• Mining: Ministry of Mines;
• Defence: Department of Defence Production, Ministry of Defence;
• Cases relating to FDI in small arms: Ministry of Home Affairs
• Broadcasting: Ministry of lnformation and Broadcasting;
• Print Media: Ministry of lnformation and Broadcasting;
• CivilAviation: Ministry of Civil Aviation;
• Satellites: Department of Space;
• Telecom: Department of Telecommunications, Ministry of Communications;
• Private Security Agencies: Ministry of Home Affairs;
• Trading (Brand and Food retail): Department of lndustrial Policy & Promotion, Ministry of Commerce & lndustry; and
• Pharmaceuticals: Department of Pharmaceuticals, Ministry of Chemicals and Fertilisers.

Applications relating to issue of equity shares under the FDI policy under the Government route for import of capital goods / machinery / equipment (excluding second-hand machinery) shall be handled by the DIPP.

Applications relating to issue of equity shares for preoperative/pre-incorporation expenses (including payments of rent etc.) shall be processed by the DIPP.

Applications for foreign investment into a Core lnvestment Company or an lndian company engaged only in the activity of investing in the capital of other lndian Companyies shall be processed by the Department of Economic Affairs, Ministry of Finance irrespective of the sector in which the investment is being made.

Please follow the link at the top of the page for the Government Memorandum on the Abolition of the FIPB.