DIPP floats draft cabinet note to raise FDI threshold to Rs 3000 crore from Rs 1200 crore

NEW DELHI: The government may more than double the threshold at which Cabinet approval becomes necessary for foreign investment, making it much less cumbersome to attract big-ticket foreign investments in infrastructure and manufacturing sectors. The department of industrial policy and promotion ( DIPP) has floated a draft cabinet note on the proposal to raise the threshold toRs 3,000 crore from the current limit of Rs 1,200 crore.

Limit was doubled in 2010

Overseas investment proposals below that level currently require Foreign Investment Promotion Board (FIPB) approval and the finance minister’s permission. Beyond that limit, the investment needs to be approved by the cabinet committee on economic affairs (CCEA). This limit was doubled fromRs 600 crore in 2010. “The idea is to cut down layers and make investments easier,” said a senior government official.


FIPB is an inter-ministerial body chaired by the secretary of the department of economic affairs that recommends overseas investment proposals to the finance minister for approval. If the DIPP suggestion is accepted, the finance minister will have the authority to approve foreign direct investment ( FDI) proposals of up to Rs 3,000 crore.

A multi-layered clearance process delays investment proposals but also clogs the agenda of the CCEA, which is also tasked with dealing with key economic matters. With deal sizes increasing over the years, more proposals need to be decided by the CCEA. “This is the right step towards further liberating the exchange control regime and will certainly help reducing delays in the approval process of large FDI proposals,” said Punit Shah, co-head of tax, KPMG.

The Narendra Modi government has identified ease of doing business as a key focus area and all ministries and departments are attempting to cut down on unnecessary procedures and approvals. “The road map for us is very clear. We need a lot of investment in India and we need to ease the process of doing business in India and therefore slowly we are introducing changes in that direction,” Finance Minister Arun Jaitley told a group of investors in London on Friday.

The government threw open the railways to foreign investors and raised the FDI limit in defence soon after taking over. Parliament approved an increase in overseas investment in insurance with the passage of legislation last week.