Updated July 21, 2023
Definition of FIPB
FIPB stands for Foreign Investment Promotion Board which was constituted by the government of India to consider Foreign direct investment which does not fall under the automatic route category.
The government of India set up the FIPB the only agency in India that deals with foreign investments and other investments in India, the main motive of this board is to carry out promotional activities to boost foreign investment and promote industries in India to attract investments from around the globe.
Role of FIPB
- The main and foremost role of FIPB would be to smoothen the process of investment for foreign investors, in a way this committee works very diligently to approve foreign investment proposals.
- The board also reviews the FDI policies which can be further used to communicate with other agencies such as administrative agencies, legal counsel and others, this enables to create transparency in the system and policies.
- After the proposal is approved by the government the board also overlooks the approved proposals.
- It enables smooth communication between government, non-government and other commercial parties in the nation in order to increase the FDI flow in the country.
- The board also reaches out to various industries to try to tap the sectors which require FDI for growth and development.
- It also engages itself in other activities which directly or indirectly increases the flow of FDI in the country.
Functions of FIPB
- FIPB is the central board and a designated institution that reviews the FDI proposals requiring a nod from the government.
- Other than reviewing FDI policies the board also assists in granting approvals for the projects which require foreign technology or foreign investment.
- FIPB is situated in the Department of economic affairs which falls under the purview of the Ministry of Finance, so in a way, the Finance minister oversees the FIPB.
- As per the latest figures from June 2016, FIPB can recommend projects which are valued below 5000cr to the Finance Ministry for further consideration.
Constitution of FIPB
- The composition of FIPB is quite clear since it is under the governance of the Finance ministry it also comprises secretaries from the main ministries of the government of India.
- The chairperson of the FIPB is a key person is a person who holds the position of Secretary of the department of economic affairs under the Minister of Finance.
- Other members constitute the department of commerce of both ministries of commerce and industry, secretaries of Department for Promotion of Industry and Internal Trade, Secretary of Economic relations, MEA (Ministry of External Affairs) and lastly Secretary of Ministry of Overseas Indian Affairs.
Need of FIPB
- FIPB acts as an intermediary between foreign investors and local industries and it facilitate the investment process in a very systematic manner.
- Since there are other commerce and industry divisions involved in the core committee of FIPB it covers most of the industries and sectors which makes it easy to spot the required sector for FDI.
- The crucial function of FIPB is to act as a mediator with other departments like administrative, legal, commerce, internal trade or international promotions, this not only makes the process transparent it increases the consumer confidence as an investor. Also, the investment process becomes very easy and smooth since it gives a clear picture to the investor and they get it all under one roof of FIPB.
- However, in 2017 April FIPB was abolished and it was replaced by FIFP which stands for the Foreign Investment facilitation portal. This was basically done to increase transparency and make the whole process more efficient which eventually speeds up the clearance procedure.
Advantages and Disadvantages of FIPB
Below is the following explains the advantages and disadvantages of FIPB:
- For the economic prosperity of any nation foreign inflow is a very essential factor, for the same reason FIPB was constituted which facilitates the investment process.
- For the perspective of foreign investors, it becomes very convenient if they have to coordinate with a centralized department of FIPB rather than communicating with all other commerce departments to know the whereabouts of the investment.
- Additionally, the main motive of this department was to create transparency in the investment process, this factor not only facilitates the speed of the whole process but also encourages foreign investors to invest in India.
- FDI is very essential to strengthen the economy of India, it can generate employment, bring development and inject liquidity in the local market which eventually adds up to the positive growth numbers, here FIPB plays a vital role.
- The major disadvantage after dismantling FIPB is that currently still there are some active wings of the committee which is actively granting approvals for FDI inflow, this creates confusion and sometimes repetition too.
- The abolishment of FIPB was to create more transparency and to speed up the process, of some wings from FIPB actively work than the whole motive of the new committee would be counterproductive.
- Lastly, it will end up increasing the overall cost of the process since many activities may be overriding due to the repetition of work with the approval process. Also, it will increase the number of touchpoints for the Indian investee to coordinate with which defeats the whole purpose of speeding up the entire process.
FIPB was initially set up by the government of India to facilitate smooth functioning of FDI inflows in the nation, major secretaries from various divisions manage this committee and straighten out trade policies with them to smoothen the whole investment process. FIPB is now replaced with FIFP which works on the same lines but has a more polished approach than FIPB.
This is a guide to the Full Form of FIPB. Here we discuss roles, function, constitution, needs with benefits and limitations. You can also go through our other related articles to learn more –