CCEA approved hike in investment limit for cases requiring prior approval of FIPB

The Union Cabinet Committee on Economic Affairs (CCEA) on 6 May 2015 gave its nod for increase in the investment limit for cases requiring prior approval of Foreign Investment Promotion Board (FIPB) to 3000 crore rupees from the present 2000 crore rupees.

The decision is aimed at expediting foreign investment clearance process there by increased investment flows into the economy.

The FIPB is an inter-ministerial body under the Union Ministry of Finance which is responsible for processing Foreign Direct Investment (FDI) proposals and making necessary recommendations to the Finance Ministry, which gives the final approval.

Under the present practice, FDI is allowed into the country under two routes: Automatic and Approval Route.

Under the Automatic Route, the investors need not take any approvals from the government but only required to give prior intimation to the Reserve Bank of India (RBI). Majority of the sectors of the economy come under the Automatic Route.

Under the Approval Route, if the investment is up to 3000 crore rupees it is vetted by the FIPB and will be forwarded to the Finance Ministry for final approval. If the investment is above 3000 crore rupees the investment proposal must be cleared by the CCEA which functions under the chairmanship of the Prime Minister. At present, strategic sectors like telecommunication services, defense, civil aviation are kept under this route.

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