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FIPB (Foreign Investment Promotion Board)


 

FIPB (Foreign Investment Promotion Board)

FIPB stands for Foreign Investment Promotion Board is a government of India agency which exists to control and co-ordinate the foreign direct investment (FDI) which doesn’t come under the automatic route. FIPB was a body under the Dept. of economic affairs, ministry of finance till it ceases to exist from 24th May 2017.

To speed up the inflow of funds and also to increase the transparency in the system through FDI the FIPB was abolished by then Finance minister Arun Jaitley in the year 2017. Currently FIFP (Foreign Investment Facilitation Portal) has replaced the roles and responsibilities of FIPB. The board was dissolved followed by the Jaitley’s budget in the year 2017. The government claimed to be taking out a layer which required the government approval and could be delaying the process of raising FDI.

 

Roles of FIPB

FIPB acts as a medium for bringing FDI into the country with in the cap of 1200 crore. It makes sure the process right from filing for approval till the usage off funds are done with at most transparency and effectiveness.

·       FIPB grants single window approval for the project proposals under the foreign direct investment.

·       FIPB acts as the delegator for the government in controlling the inflow of the FDI into the sector inside the country.

·       FIPB comprises of representatives and secretaries from different ministries who examine the project proposal under FDI carefully and approves the same.

·       Proposals up to 1200 crores are considered by the FIPB committee to approve and sanction the FDI.

·       Project crossing the size of 1200 crores needs to take approval from the ministry economic affairs (Cabinet Committee on Economic Affairs CCEA)

·       Firms and business seeking FDI under 1200 can go for e-filing to put up the project proposal for approval from FIPB.

·       The FIPB through this e-filing maintains the transparency and improves the efficiency of decision making.

 

Functions of FIPB

FIPB is a board which is created by government and reports to ministry of finance. FIPB is one of the efficient means for government to control and manage FDI inside the domestic boundaries. FDI requirement sector/ industry wise is managed and maintained by the foreign investment Promotion Board.

·       The main function of FIPB is to review execution and usage of funds raised through the Foreign direct investment.

 

·       To make sure the process of raising FDI is quicker and approvals don’t get delayed in any manner.

·       It acts as a communicator between the government, non-government, industry and agency bodies.

·       It’s another function is to bridge the communication gap between FIPB and FIPC (Foreign Investment Promotion Council)

·       To research individual sector to find out the need and range of FDI required by each of these sectors.

·       To conduct campaigns of larger scale to create awareness and make FDI look attractive from the perspective of investors.

·       To maintain the transparency and efficiency in the system of raising foreign direct investment inside the country.

 

Constitution of FIPB

The main agenda of FIPB is to manage the flow of FDI into the country. The FDI in very crucial in building and economy as the rate of interest is very low compared to the domestic ones. The lock period on these FDI funds is also more the local lock in periods. Hence for the business to expand, the FDI is cheaper compared to the rest of them available locally. The margins can be increases significantly and the available funds can be used for working capital management.

FIPB does research on the different industries sector wise and decide the range of FDI should be prevailing in that particular sector. When the government fixes the cap on individual sector for permissible FDI in each sector, FIPB approves the proposal for FDI through these industries. FIPB is present not only to speed up the approval process by also to maintain the transparency of the flow of funds. The FIPB should also make sure the funds are used in correct manner and the purpose of FDI decided by the government is served fully.

 

Need for FIPB

FIPB is the board for bringing the funds through FDI. It acts as the bridge between government bodies, non-government bodies, and firms, agencies to communicate and decide the optimum FDI limit in each sector. It also approves the proposal for FDI by which FIPB also controls the flow of FDI into the economy. FIPB can approve proposal till 1200 crore across the sectors. The Government has upper say on limit of FDI in each sector. Whenever there is a change in limit, the approval and proposal will take a lot time to get effective. FIPB’s presence makes the whole process quicker and also keep the whole process transparent and efficient. FIPB is a government controlled board which mainly indulges in the inflow and outflow of FDI into the country.

 

 

Advantages of FIPB

·       The FIPB speeds up the process of project proposal and approval of funds under FDI.

·       Firms and corporations can raise funds in FDI quota approved by government of India quickly through FIPB.

·       The transparency maintained by the FIPB is inflow of FDI funds is significant and proves credibility for the corporations.

·       FIPB launches many campaigns to advertise the FDI in domestic sector globally and bridges the gap between firms and investors.

·       The paper work and regulations required for FIPB limit funds (Less than 1200 crore) is less and easy to manage.

·       FDI boosts the infrastructure and business of the sector it is going into.

·       Local companies and players have access to foreign market, resources and can optimize on optimum cost of production.

Disadvantages

·       One more layer of approval between the firms and the government agencies.

·       The FIPB bought fund via FDI acts against the local investing opportunity and local players cannot compete as the FDI funds come a lot cheaply.

·       The lock in period is longer no doubt but the vulnerability of the economy increases with the increasing FDI.

·       FDI funds coming into the economy has negative impact on the exchange rate of the local currency in global market.

·       More FDI funding leads to modern day colonialism.

·       Local players cannot compete with the competency and calibre of global players which is a hindrance to the economy.

 

Conclusion

FIPB is a board managed by the government of India for approval of FDI funding till 1200 crore. The board comprises of representatives from different ministries in order to decide, control and manage the optimum FDI level in each sector/industry. The board does an in depth research on each sector before the deciding on the level of permissible FDI in the industry. The board also makes sure to maintain the transparency and effectiveness of the process of inflow of funds into the economy. The Board was dissolved and replaced by Foreign Investment Facilitation portal (FIFP) by then Finance minister Arun Jaitley. Now the roles and responsibilities of FIPB is resumed by FIFP saying the later just contributed to one extra round of approval for FDI.

 

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