The proposed dismantling of Foreign Investment Promotion Board (FIPB), which vets proposals involving fund inflows from overseas, is likely to be bundled with related policy reforms. On top of the list is doing away with prior government approval for investments in most sectors, including single-brand retail, which could see dilution of the 30% domestic sourcing clause. With domestic private investment not picking up, the government is largely counting on foreign funds to speed up infrastructure creation. India needs an estimated $1.5 trillion over 10 years to build infrastructure such as roads, airports and power projects. The latest round of FDI reforms is aimed at making the process easier for foreign investors. As the multiple layers in clearance often lead to unnecessary delays the government plans to put more sectors on the automatic approval route.
Most sectors have automatic approval for investments up to 49%. In most cases, approval is required for investments exceeding 49%. In mining and minerals, 100% FDI is allowed but government approval is required. Many of these sectors could be freed up in the policy review. Top government officials have already discussed details of the new FDI regime and a call will be taken shortly. The finance ministry, separately, has moved a draft cabinet note for dismantling FIPB.
Image source: Barron’s