More than 90% of the total FDI inflows are now through the automatic route. “The Foreign Investment Promotion Board (FIPB) has successfully implemented e-filing and online processing of FDI applications. We have now reached a stage where FIPB can be phased out. We have therefore decided to abolish the FIPB in 2017-18. A roadmap for the same will be announced in the next few months. In the meantime, further liberalization of FDI policy is under consideration and necessary announcements will be made in due course,” Arun Jaitley, India’s Minister of Finance said.
Abolition of FIPB is an indication of further liberal policy for the defense sector since any FDI beyond 49% requires government approval. “It appears that either this sector will be further liberalized by allowing 100% FDI in the automatic route or the nodal ministry will process and decide any application for approval of an FDI in excess of 49%. We need to wait for the roadmap ahead,” says Atul Pandey, associate partner, Khaitan & co.
Government hopes abolition of FIPB and more liberal policy will start attracting more investment in defense sector which attracts only $1 million in last two years. On the other hand, overall FDI has witnessed 36% jump during April-September 2016, despite 5% reduction in global FDI inflows.
