Tezzbuzz Desk- The central government is preparing major changes in FDI rules to promote foreign investment in India and to approve big projects faster. Under the proposed change, the limit of foreign investment proposals going to the Cabinet Committee on Economic Affairs i.e. CCEA can be increased from Rs 5,000 crore to Rs 15,000 crore. If the government approves this proposal, then there will be no need to send foreign investment proposals up to Rs 15,000 crore to CCEA and the concerned ministries will be able to approve them at their own level.
The current system is in effect since November 2015. Under this, FDI proposals up to Rs 5,000 crore can be approved by the concerned ministry or department at its own level, while investment proposals above this amount are sent to CCEA. The size of the Indian economy and investment has grown rapidly in the last few years. In such a situation, the government believes that there is a need to change this almost decade old rule. After the implementation of the proposed new limit, the approval process for big foreign investors can become much easier and faster than before. The biggest benefit of this change can be given to projects with big investment. If a foreign company wants to invest thousands of crores of rupees in India, it has to complete the approval process at many levels. It may take additional time for the proposal to reach CCEA and get final approval from there. In the new system, proposals up to Rs 15,000 crore can be settled at the level of the concerned ministries only. This will save time for investors and work on projects is also expected to start soon.
The government is also considering giving relief in the rules of downstream investment i.e. indirect foreign investment. This is intended to reduce the need for repeated government approvals where the necessary approvals have already been obtained for the proprietary chain of an investment. Under the proposed change, if a company higher up in the ownership chain of a domestic company has already obtained the necessary government approval for foreign investment, then the Indian company below it may not need to seek permission again for the same investment. However, in some cases, the need for government approval may continue. Especially in areas where prior government permission is required or where the investment is linked to countries sharing land borders with India. The government's effort is to simplify and clarify the process rather than abolishing these rules completely, so that there is no unnecessary delay in the way of legitimate foreign investment.
According to sources, this proposal has been discussed between the Ministry of Finance, Department of Promotion of Industry and Internal Trade i.e. DPIIT and NITI Aayog. Now the cabinet approval is awaited. If the proposal gets the green signal, the approval process for foreign investment in India could be simplified to a great extent. The government's overarching goal is to make India an attractive investment hub and strengthen the 'ease of doing business'. With the arrival of foreign capital, new industries and projects can start and employment opportunities can also increase. Apart from this, increasing investment in manufacturing, infrastructure and other capital-intensive sectors can give impetus to economic activities. However, the final changes will depend on Cabinet approval and official rules to be issued.