Foreign Investment Promotion Board (FIPB) : Full Form, Roles, Functions and Need

What is FIPB?

FIPB is a Board established by the Government of India to evaluate foreign direct investments that don’t fall into the automatic route category. The full form of FIPB is the Foreign Investment Promotion Board. The FIPB is the only organisation in India that deals with foreign investments and other investments. The Indian government established it with the primary objective of conducting promotional activities to attract more foreign investment and promote Indian industries. The goal is to facilitate the inflow of investments from around the world into India.

Arun Jaitley, the then-finance minister, abolished the FIPB in 2017 to encourage the inflow of funds and improve transparency in the system through FDI. In 2017, the board was abolished before the release of Jaitley’s budget. The government claimed that it was eliminating a layer of bureaucracy that required government approval, which may have been delaying the increase in foreign direct investment. The functions and duties of the FIPB have been replaced by the FIFP (Foreign Investment Facilitation Portal).

Roles of FIPB

1. Make Investment Process Simpler: The main role of FIPB is to make the investment process easier for foreign investors, as the committee makes every effort to approve requests for foreign investment.

2. Reviewing FDI Policies and Proposals: To increase system and policy transparency, the board also evaluates the FDI policies that can be used for communication with other organisations such as administrative agencies, legal counsel, and others. The board also ignores the accepted proposals after the initiative has received government approval.

3. Facilitates Communication: It allows for easy communication between the government, non-government organisations, and other commercial parties in the country, which increases the flow of FDI into the country as a whole.

4. Promotes Growth and Development: The board also contacts a variety of businesses to identify those areas that need FDI for growth and development.

Functions of FIPB

The FIPB is a government body that reports to the minister of finance. The FIPB is one effective tool the government has to oversee and control FDI within domestic borders. The Foreign Investment Promotion Board oversees and maintains the FDI requirements sector and industry-wise.

1. Raise Awareness: To execute more comprehensive marketing activities to raise awareness and make FDI more appealing to investors from various countries.

2. Increasing Flow of FDI: The Foreign Investment Promotion Board works on increasing the amount of FDI that enters India by taking part in initiatives that promote investment in the country. It also makes sure that an increase in the FDI takes place more rapidly and that approvals are not delayed in any way.

3. Acts as One-window Board for Investors: The FIPB will act as an effective, accessible, and transparent and serve one-window board for investors when evaluating investment applications in India. With this, Multinational firms, non-resident Indians, and other overseas investors may make direct investments in India.

4. Enhance Transpaency: It makes communication between governmental, nonprofit, business, and agency groups simpler.

Need of FIPB

1. To Make Investing Process Straightforward: The FIPB functions as an intermediary between international investors and local industries and streamlines the investment process. The crucial role of the FIPB is to serve as a mediator between many departments, including administrative, legal, commercial, internal trade, and international promotions. This makes the process transparent and increases consumer trust as an investor. In addition, as the investor receives a clear image and has access to everything under the FIPB’s roof, the investing process is made straightforward.

2. To Determine the Necessary Sector for FDI: It is simple to identify the required sector for FDI because the core committee of the FIPB includes representatives from various business and industry divisions and covers a broad range of industries and sectors.

3. To Enhance Transparency and Efficiency: In April 2017, the Foreign Investment Facilitation Portal (FIFP) took the position of the Foreign Investment Promotion Board (FIPB). This replacement aimed to enhance transparency and efficiency in the clearance procedure, leading to faster processing times.

Advantages of FIPB

1. Speedy Approval of Project: The Foreign Investment Promotion Board (FIPB) facilitates the speedy approval of project proposals and foreign direct investment (FDI) funding. With FIPB, businesses and corporations can quickly raise funds within the FDI quota authorised by the government of India.

2. Promotes Inflow of FDI and Other Programs: A considerable inflow of FDI capital and the transparency maintained by the FIPB demonstrate the credibility of the businesses. Foreign Direct Investment (FDI) has the potential to significantly improve the business environment and infrastructure of a sector. Besides, to bridge the gap between businesses and investors and promote FDI in the domestic sector worldwide, the FIPB has undertaken several programs.

2. Less Paperwork: For FIPB limit funds (less than ₹1200 crore), the paperwork and regulations needed are limited and simple to handle.

3. Optimise Production Costs: Local businesses and players have access to overseas markets and resources, which helps them to optimise production costs.

Disadvantages of FIPB

1. Duplication of Efforts: The main drawback of the FIPB’s is that some of the committee’s active wings still approve FDI inflows. This leads to confusion and sometimes duplication of effort.

2. Poses Problem for Local Businesses: With FIPB, local players are unable to compete because of the FDI funds’ low costs, which the FIPB purchased by acting against the local investing opportunity. Local businesses struggle to compete with the competence and quality of global competitors, which affects the economy.

3. Increases Cost: Since so many tasks may end up being repeated due to the approval procedure, the process’ overall cost will increase. Additionally, it will add to the Indian investee’s coordination burden, defeating the objective of accelerating the process.

FIPB is made up of representatives from many ministries to determine, regulate, and manage the required FDI level in each sector or industry. Before deciding on the quantity of permitted FDI for each industry, the board conducts extensive research on each sector. The board also makes sure that the flow of funds into the economy continues to be transparent and efficient. Arun Jaitley, who was the finance minister at the time, abolished the Board and replaced it with the Foreign Investment Facilitation Portal (FIFP). The FIFP has taken over the duties and obligations of the FIPB, and it has just helped promote FDI approval again.