Finmin Pitches for Full Con­trol of FDI Pol­icy

Locked in a turf bat­tle with DIPP, finmin feels it will be able to frame & im­ple­ment pol­icy bet­ter

The Economic Times - - Economy - DEEPSHIKHA SIKAR­WAR

Days be­fore the ex­pected re­struc­tur­ing of min­istries and de­part­ments by the new govern­ment, the fi­nance min­istry has sought full con­trol of the for­eign di­rect in­vest­ment (FDI) pol­icy. An of­fi­cial aware of the de­vel­op­ment said the min­istry has ar­gued that the depart­ment of eco­nomic af­fairs (DEA), which is un­der the fi­nance min­istry, is well placed to take a holis­tic view of the FDI pol­icy as part of its man­date to frame and im­ple­ment the eco­nomic and fi­nan­cial sec­tor pol­icy. A part of the FDI pol­icy is cur­rently ad­min­is­tered by the depart­ment of in­dus­trial pol­icy and pro­mo­tion (DIPP), which is un­der the com­merce and in­dus­try min­istry. “We be­lieve that FEMA, which gov­erns for­eign cap­i­tal flows in­clud­ing FDI, FDI pol­icy and FIPB should be in one place and where the bal­ance of con­ve­nience lies in terms of ef­fi­ciency,” fi­nance sec­re­tary Arvind Ma­yaram told ET.

In­ci­den­tally, in the last round of re­struc­tur­ing car­ried out by the NDA govern­ment in 2003, the For­eign In­vest­ment Pro­mo­tion Board (FIPB) was shifted to the fi­nance min­istry from DIPP. The idea comes ahead of an ex- ex­pected to re­jig min­istries to make them more ef­fec­tive

in its pre­sen­ta­tion to Cab­i­net sec­re­tary sought full con­trol of FDI pol­icy

pol­icy is largely ad­min­is­tered by DEA in fi­nance min­istry

at the for­eign di­rect in­vest­ment pol­icy

takes de­ci­sions on in­vest­ments on ap­proval route, is housed in fi­nance min­istry is also with fi­nance min­istry

of pol­icy if it is at one place are of­ten con­fused about for­eign pol­icy ad­min­is­tra­tion pected re­struc­tur­ing by the Naren­dra Modi govern­ment to down­size, align and re­jig min­istries to make them more ef­fec­tive. The new govern­ment is look­ing at leaner struc­tures and re­or­gan­i­sa­tion of min­istries and de­part­ments, and it is likely that the com­merce may be moved to ex­ter­nal af­fairs to give an eco­nomic touch to the coun­try’s for­eign pol­icy.

fi­nance min­istry have been at odds on many for­eign in­vest­ment is­sues

cru­cial for eco­nomic de­vel­op­ment and re­quires more holis­tic ap­proach in­vest­ment pol­icy is with trea­sury North Block, as the fi­nance min­istry is pop­u­larly called, ad­min­is­ters the For­eign Ex­change Man­age­ment Act (FEMA), which pro­vides the le­gal frame­work to the coun­try’s for­eign in­vest­ment regime. North Block also houses the FIPB. A press note is­sued by the DIPP comes into ef­fect only af­ter it is no­ti­fied un­der FEMA. More­over, the fi­nance min­istry is also the ad­min­is­tra­tive min­istry for all fi­nan­cial sec­tor reg­u­la­tors and houses the Fi­nan­cial Sta­bil­ity and De­vel­op­ment Coun­cil (FSDC) and, thus, can more ef­fec­tively co­or­di­nate the pol­icy with the reg­u­la­tors, in­clud­ing the Re­serve Bank of In­dia.

Glob­ally, the FDI pol­icy is the remit of the trea­sury or their fi­nance de­part­ments. Distinc­tion be­tween type of cap­i­tal has di­min­ished grad­u­ally in a glob­alised world mak­ing uni­form treat­ment from un­der one roof im­per­a­tive. In the cur­rent regime, DIPP ad­min­is­tra­tively han­dles the FDI pol­icy and is­sues press notes. In­ci­den­tally, the last round of FDI lib­er­al­i­sa­tion was based on a panel headed by eco­nomic af­fairs sec­re­tary Arvind Ma­yaram even as the DIPP has been seek­ing a com­plete con­trol of the FDI pol­icy. The fi­nance min­istry and the DIPP have been locked in a turf bat­tle af­ter the lat­ter did not con­sult it over the in­vest­ment com­po­nent in the In­dia-Asean Com­pre­hen­sive Eco­nomic Pro­mo­tion Agree­ment. A for­mal Cab­i­net note on the is­sue was for­warded to the fi­nance min­istry by the Prime Min­is­ter’s Of­fice af­ter it found its views miss­ing in the note. Fi­nance min­is­ter P Chi­dambaram had ex­pressed se­ri­ous con­cerns over cer­tain pro­vi­sions in the agree­ment but was over­ruled.

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