Why in the News
The government plans to raise the FDI threshold requiring CCEA approval from ₹5,000 crore to ₹15,000 crore, reducing political-level scrutiny for large investments.
What is the FDI Approval System?
- Automatic route: No prior government approval is required.
- Government route: Requires approval from the concerned ministry/department.
- CCEA layer: Very large proposals above the prescribed threshold require Cabinet Committee on Economic Affairs (CCEA) approval.
Impact of Raising the Threshold
- Fewer escalations: Investments between ₹5,000 crore and ₹15,000 crore can avoid CCEA clearance.
- Faster approvals: Reduces procedural delays and improves the ease of doing business.
- Greater investment autonomy: Gives ministries greater authority to clear large investments.
- Liberalisation: Continues India’s shift towards a simpler, faster FDI regime, following the abolition of FIPB in 2017.
Value Addition
- FDI: Investment by a foreign entity in an Indian enterprise with a lasting interest.
- FIPB: Abolished in 2017; its role was transferred mainly to the concerned ministries/departments.
- Key balance: Faster approvals must be accompanied by national security, competition and strategic-sector safeguards.
“[2016, GS3, 12.5 marks] Justify the need for FDI for the development of the Indian economy. Why is there a gap between MoUs signed and actual FDIs? Suggest remedial steps to be taken for increasing actual FDIs in India.”