The present policy regarding Foreign Direct Investment (FDI) and foreign technology transfer, broadly permits foreign investment in all areas, except a few such as defense, atomic energy, atomic minerals, etc. It also permits technical collaboration in all areas of private enterprise, and allows the entrepreneur to decide his collaboration including the terms of agreement on the basis of commercial judgment.
After the industrial policy announcement in July, 1991, the approval mechanism for foreign investment has two routes:
(i) an automatic approval route and (ii) Government approval route.
a) Foreign direct investment upto 51 per cent in 35 priority industries (Annexure III of NIP, 1991) are eligible for automatic approval by RBI subject to their conforming to the parameters.
b) As far as the Government approval route is concerned Foreign Investment Promotion Board (FIPB) was constituted in 1992 under the chairmanship of Principal Secretary to Prime Minister when Prime Minister was the Industry Minister also. Secretaries of Finance, Commerce and Department of Industrial Policy and Promotion (DIPP) are the other members. The Secretary of the concerned administrative Ministry is also invited.
The recommendations of the FIPB are placed before an Empowered Committee, which has been constituted under the Chairmanship of Finance Minister. The meetings of the Empowered Committee are arranged by the Secretariat for Industrial Approvals (SIA). The Empowered Committee is competent to approve proposals involving total investment upto Rs.300 crore.
The proposals above Rs.300 crore are placed before the Cabinet Committee on Foreign Investment chaired by Prime Minister himself.
Projects Approval Board
Technical collaborations not conforming to automatic parameters are considered by Projects Approval Board which is chaired by the Secretary, Department of Industrial Policy and Promotion.
Status of Approvals
During the post-policy period (August, 1991 to March, 1996) 4473 FDI approvals amounting to Rs.678.5 billion have been issued. Over 60 per cent FDI approvals are in the priority, area (power, telecommunications, electronics, etc.)
The total number of foreign collaboration approvals (with or without FDI) approved during the period is 8406.
In response to the new economic policies towards foreign investment, total foreign direct investment approvals increased by seven times in value terms in 1992 over 1991 after suffering a setback in 1990. The approvals more than doubled between 1992 to 1993, touching Rs.88 billion in 1993. Among countries, USA ranks highest in terms of value of investments approved. Countries with no investment interest in eighties such as Oman and Thailand have shot into prominence during the nineties. Sectorwise analysis of investment reveals that the energy sector attracted the highest direct investment in 1993. The total inflow of FDI in 1993 was Rs18 billion with the highest inflow coming from NRIs and USA.
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