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The announcement assumes significance as FDI in the country has recorded a decline | File image
The Department for Promotion of Industry and Internal Trade (DPIIT) will formulate strict timelines for different government agencies and departments for clearance of Foreign Direct Investment (FDI) proposals from prioritised sectors, a top official said.
DPIIT Secretary Rajesh Kumar Singh said though there is a standard operating procedure (SOP) for these clearances, still there are delays as the SOPs are not being followed.
The secretary was responding to the Budget announcement that the rules and regulations for FDI and overseas investments will be simplified to facilitate foreign direct investments, and nudge prioritisation.
He said that the concerned ministries and departments will be nudged to prioritise applications and speed up the process of approvals.
“The idea is to cut short that (clearance and approval) process, we have not yet decided about the sectors where some liberalisation is possible, but certainly there is a view in the government that the processes, where the government route is involved which is through the ministries including DPIIT and the concerned ministries that approval process needs to be speeded up,” Singh told PTI.
After the abolition of FIPB, the granting of government approval for overseas investment under the FDI policy and FEMA (Foreign Exchange Management Act) regulations was entrusted to the concerned ministries/ departments.
The Foreign Investment Facilitation Portal (FIFP) was developed after the abolition of the Foreign Investment Promotion Board (FIPB) in May 2017. The DPIIT, under the ministry, was made the nodal department. FDI proposals are now required to be filed only on the portal which is managed by the DPIIT.
The proposals filed on the portal are forwarded to the concerned administrative ministry and are also simultaneously marked to the Ministry of External Affairs and the Reserve Bank of India for comments and to the Ministry of Home Affairs for necessary security clearance, wherever required as per the norms.
A Standard Operating Procedure (SOP) for processing FDI proposals, including documents to be filed, through the portal was framed and laid down by the DPIIT in June, 2017.
As per the SOP, ministries and departments will have to decide on the proposals within 60 days of the application.
“We will create some timelines for some of these clearances that we will have to take from other agencies and departments. We will tell the departments to prioritise a bit more that’s what we are planning. Nudge prioritisation means that where there is a prioritised sector, we need to sort of streamlined and faster movement, we just can’t sit on them in a routine manner,” Singh said.
On whether the government is looking at liberalisation of FDI norms in some sectors, the secretary said that no view has been taken on this.
However, he added, “We will work on that. Those are residual sectors as a potential for some of the reforms is quite low”.
“Sectoral caps and ceiling have largely been relaxed and if there are any small residual changes that can further be made in terms of liberalisation, we will look at that but that will go through the committee of secretaries,” he said.
The announcement assumes significance as FDI in the country has recorded a decline.
FDI equity inflows in India declined 3.49 per cent to $44.42 billion in 2023-24 due to lower infusion in sectors such as services, computer hardware and software, telecom, auto and pharma.
The total FDI — which includes equity inflows, reinvested earnings and other capital — declined marginally by one per cent to $70.95 billion during 2023-24 from $71.35 billion in 2022-23.
Further on the Budget announcement to cut corporate tax for foreign firms from 40 per cent to 35 per cent, the secretary said it will help in reducing the gap between “what the Indian corporates pay and what the foreign corporates pay”.
It will incentivise more foreign investment into the country and expansion of the existing foreign companies who are already commercially present in India, he said.
On the customs duty rationalisation, Singh said that most of the sectors like electronics and leather recommended by the DPIIT were facing an inverted duty structure and the rationalisation will help boost domestic manufacturing.
Inverted duty structure refers to the taxation of inputs or intermediates at higher rates than finished products that result in the build-up of credits and cascading costs.
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First Published: Jul 24 2024 | 2:28 PM IS