Full Form of FIPB

Full Form of FIPB

The Full Form of FIPB is the Foreign Investment Promotion Board. India’s government agency exists to control and co-ordinate foreign direct investment (FDI), which doesn’t come under the automatic route. FIPB was a body under the Department of Economic Affairs, Ministry of Finance, till it ceased to exist from 24th May 2017.

To speed up the inflow of funds and increase transparency in the system through FDI, the FIPB was abolished by then Finance minister Arun Jaitley in the year 2017. Currently, FIFP (Foreign Investment Facilitation Portal) has replaced the roles and responsibilities of FIPB. The board was dissolved, followed by Jaitley’s budget in the year 2017. The government claimed to be taking out a layer which required government approval and could be delaying the process of raising FDI.

Roles

FIPB acts as a medium for bringing FDI into the country within the cap of Rs 1200 crore. It makes sure the process right from filing for approval until the usage of funds is done with transparency and effectiveness.

You are free to use this image on your website, templates etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Full Form of FIPB (wallstreetmojo.com)

Functions

FIPB is a board that is created by the government and reports to the ministry of finance. FIPB is one of the efficient means for the government to control and manage FDI inside the domestic boundaries. FDI requirement sector/ industry-wise is managed and maintained by the Foreign Investment Promotion Board.

You are free to use this image on your website, templates etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Full Form of FIPB (wallstreetmojo.com)

  • The main function of FIPB is to review the execution and usage of funds raised through the Foreign direct investment.
  • To make sure the process of raising FDI is quicker and approvals don’t get delayed in any manner.
  • It acts as a communicator between the government, non-government, industry, and agency bodies.
  • It’s another function is to bridge the communication gap between FIPB and FIPC (Foreign Investment Promotion Council)
  • To research the individual sector to find out the need and range of FDI required by each of these sectors.
  • To conduct campaigns of a larger scale to create awareness and make FDI look attractive from investors’ perspective.
  • To maintain transparency and efficiency in the system of raising foreign direct investment inside the country.

Constitution of FIPB

The main agenda of FIPB is to manage the flow of FDI into the country. The FDI is very crucial in building an economy as the rate of interest is very low as compared to the domestic ones. The lock period on these FDI funds is also more than the local lock-in period. Hence for the business to expand, the FDI is cheaper compared to the rest of them available locally. The margins can be increases significantly, and the available funds can be used for working capital managementWorking Capital ManagementWorking Capital Management refers to the management of the capital that the company requires for financing its daily business operations. It is important for the company in order to maximize its operational efficiency, manage its short term liabilities and assets properly, avoiding the underutilization of the resources and avoiding the overtrading, etc.read more.

FIPB does research on the different industries sector-wise and decides the range of FDI should be prevailing in that particular sector. When the government fixes the cap on the individual sector for permissible FDI in each sector, FIPB approves the proposal for FDI through these industries. FIPB is present not only to speed up the approval process but also to maintain the transparency of the funds’ flow. The FIPB should also make sure the funds are used correctly, and the purpose of FDI decided by the government is served fully.

Need

FIPB is the board for bringing the funds through FDI. It acts as the bridge between government bodies, non-government bodies, and firms, agencies to communicate and decide the optimum FDI limit in each sector. It also approves the proposal for FDI by which FIPB also controls FDI flow into the economy. FIPB can approve proposals until 1200 crore across the sectors. The Government has an upper say on the limit of FDI in each sector. Whenever there is a change in the limit, the approval and proposal will take a lot of time to get effective. FIPB’s presence makes the whole process quicker and also keeps the whole process transparent and efficient. FIPB is a government-controlled board that mainly indulges in the inflow and outflow of FDI into the country.

Advantages

  • The FIPB speeds up the process of project proposal and approval of funds under FDI.
  • Firms and corporations can raise funds in FDI quota approved by the government of India quickly through FIPB.
  • The transparency maintained by the FIPB is an inflow of FDI funds is significant and proves credibility for the corporations.
  • FIPB launches many campaigns to globally advertise the FDI in the domestic sector and bridge the gap between firms and investors.
  • The paperwork and regulations required for FIPB limit funds (Less than Rs 1200 crore) are less and easy to manage.
  • FDI boosts the infrastructure and business of the sector it is going into.
  • Local companies and players have access to foreign markets, resources, and can optimize production’s optimum cost.

Disadvantages

  • One more layer of approval between the firms and the government agencies.
  • The FIPB bought funds via FDI acts against the local investing opportunity, and local players cannot compete as the FDI funds come a lot cheaply.
  • The lock-in period is longer, no doubt, but the economy’s vulnerability increases with the increasing FDI.
  • FDI funds coming into the economy harms the exchange rate of the local currency in the global market.
  • More FDI funding leads to modern-day colonialism.
  • Local players cannot compete with global players’ competency and caliber, which is a hindrance to the economy.

Conclusion

FIPB is a board managed by India’s government for approval of FDI funding till Rs 1200 crore. The board comprises representatives from different ministries to decide, control, and manage the optimum FDI level in each sector/industry. The board does in-depth research on each sector before deciding on the level of permissible FDI in the industry. The board also makes sure to maintain the transparency and effectiveness of the process of inflow of funds into the economy. The Board was dissolved and replaced by the Foreign Investment Facilitation Portal (FIFP) by then Finance minister Arun Jaitley. Now the roles and responsibilities of FIPB are resumed by FIFP, saying the later just contributed to one extra round of approval for FDI.

Recommended Articles

This has been a guide to the Full Form of FIPB and its definition. Here we discuss the roles, functions, need of FIPB along with advantages and disadvantages. You may refer to the following articles to learn more about finance –