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
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.