“If there is a regulator for the department concerned, that is sufficient to take care of investment proposals which are coming in,” Sitharaman added.
While FIPB had the final say in approving FDI proposals in the country for long, its power has been systematically reduced by the current government. Most notably, in June 2016, the government had announced relaxed FDI norms in a large number of sectors including single-brand retail, pharmaceuticals, animal husbandry and food products. However, while more than 90 per cent of all sectors are currently allowed under the automatic route, full or partial investments in sectors considered sensitive by the government like defence, media and broadcasting, aviation and telecom need FIPB approval.
According to current practice, the finance minister considers the recommendations of FIPB on proposals of foreign equity of Rs 5,000 crore and below. The proposals of more than Rs 5,000 crore are placed before the Cabinet Committee on Economic Affairs (CCEA).
The CCEA would continue to decide on important matters, a senior government official said. Incoming FDI grew 27 per cent in the first seven months of the financial year to $27.82 billion, from $21.87 billion a year ago. Manufacturing accounted for 41.5 per cent of the equity inflows into the country during April-October, according to the Department of Industrial Policy and Promotion (DIPP). Net FDI inflows in proportion to gross domestic product have risen sharply after the current government took office, but it is still 1.7 per cent, compared to 2.8 per cent in China or 4.9 per cent in the case of Vietnam — the highest among major developing countries.