THE HINDU Editorial Vocabulary-May 27, 2017- Topic 1

Abolishing FIPB: Red tape herring?

Nearly four months after Finance Minister Arun Jaitley promised in his Budget speech to abolish the Foreign Investment Promotion Board, theUnion Cabinet has approved its ‘phasing out’. The FIPB was set up in the early 1990s as an inter-ministerial mechanism to vet investment proposals from abroad. The Department of Industrial Policy and Promotion under the Commerce Ministry is now expected to formulate a standard operating procedure to process foreign direct investment applications in 11 sectors that are still not in the automatic FDI approval list. 

The department would have to be consulted by line ministries, which have been empowered to take ‘independent’ decisions on investments proposed in their domains. The government believes that once the Board is history, red-tapism will shrink, ease of doing business will improve and investors will find India more attractive. However, the decision is little more than a symbolic gesture. Over 90% of investment flowing in already does not require an FIPB nod as it comes in through the automatic route. And while the FIPB may have delayed clearances at times, the efficacy of this move will be determined by the ability of individual ministries (and sectoral regulators which may be involved in the ultimate decision) to exercise ‘discretionary’ powers without fear, favour or the cover provided by a collective decision-making body.

Bureaucrats are likely to remain cautious till the government carries out changes it has promised to the anti-corruption law to protect them from the wrath of auditors and investigative agencies for bona fide decisions taken in the line of duty. The trouble is that even where FDI limits have been raised significantly, there are riders and rules attached that officers need to interpret for each case. FDI inflows have surged to record highs after a lull in the UPA’s second innings, and long-awaited easing of FDI thresholds in certain sectors has been carried out. But cumbersome rules, not the FIPB, have been responsible for a less than enthusiastic response from foreign investors in some sectors. For instance, global insurers can hold up to 49% ownership in Indian ventures but only if Indians retain management and control over these entities — this is an onerous definition of control that has inhibited deal-making. Despite allowing 100% FDI in food retail, rules prohibit foreign players from using a small fraction of their shelf space for non-food items, affecting investment plans. This, in a sector that can create millions of jobs and boost farm incomes. On the other hand, archaic land acquisition and labour laws continue to make it difficult for large factories to come up. Looking ahead, the question on foreign investors’ minds is this: if a prime minister with a formidable parliamentary majority doesn’t remove such obstacles now, then when?

Vocabulary

Abolish: formally put an end to a system, practice, or institution.

Example: The tax was abolished in 1977

Synonyms: put an end to, get rid of, scrap, end, stop, terminate

Vet: make a careful and critical examination of something.

Example: Proposals for vetting large takeover bids

Synonyms: check, examine, scrutinize, investigate, inspect

Empowered: give someone the authority or power to do something.

Example: Nobody was empowered to sign checks on her behalf

Synonyms: authorize, entitle, permit, allow, license, sanction, warrant

Shrink: move back or away, especially because of fear or disgust.

Example: She shrank away from him, covering her face

Synonyms: draw back, recoil, back away, retreat, withdraw

Gesture: a movement of part of the body, especially a hand or the head, to express an idea or meaning.

Example: Alex made a gesture of apology

Synonyms: signal, sign, motion, indication, gesticulation, show

Efficacy: the ability to produce a desired or intended result.

Example: There is little information on the efficacy of this treatment

Synonyms: effectiveness, success, productiveness, potency, power

Cautious: careful to avoid potential problems or dangers.

Example: A cautious driver

Synonyms: careful, heedful, attentive, alert, watchful, vigilant

Interpret: explain the meaning of information, words, or actions.

Example: The evidence is difficult to interpret

Synonyms: explain, elucidate, expound, explicate, clarify

Shelf: a flat length of wood or rigid material.

Example: The pieces were displayed on shelves , propped against the wall, emphasizing their three-dimensionality.

Synonyms: ledge, sill, bracket, rack, mantelpiece, shelving

Archaic: very old or old-fashioned.

Example: Prisons are run on archaic methods

Synonyms: obsolete, out of date, old-fashioned, outmoded, behind the times