question_answer

Direction: Read the passage carefully and answer the questions given below it. Certain words/ phrases have been given in bold to help you locate them while answering some of the questions.

Atop bureaucrat recently signalled New Delhi's intent to wind up the Foreign Investment Promotion Board (FIPB). a body that sits on judgement over proposals on foreign direct investment (FDI) into India.

It's a good idea, even if not freshly minted. Over a decade ago, former finance minister Jaswant Singh had proposed (lie regulatory reform, saying that the FIPB bureaucracy was losing its relevance with the liberalisation of the investment regime.

Singh then told Parliament that the challenge really was not about deregulation but de-bureaucratisation, and moving in that direction purposefully would help greater flow of foreign investment. But the final say on FDI proposals rests with the finance minister, who approves the minutes of the meeting steered by a senior bureaucrat.

Would any finance minister, irrespective of the government in power, be ready to relinquish the authority?

Jaswant Singh had convinced his boss, former PM Atal Bihari Vajpayee, to shift the FIPB to the finance ministry from the department of industrial policy and promotion supposedly after a spat with a bureaucrat over a mega investment proposal. It was then reckoned that the transfer would make it easier for him to dismantle the FIPB. But that did not happen.

The rationale to continue with the FIPB has really weakened now, with FDI caps being raised in sectors including defence. More sectors are now under the automatic route where investors only need to inform the Reserve Bank of India (RBI) that regulates capital flows through the Foreign Exchange Management Act (Fema).

There is no reason why the department of revenue - co-opted as a permanent member of the FIPB - should continue to vet FDI proposals. It had opposed almost every foreign investment proposal routed through Mauritius due to concerns over the misuse of the island nation's tax treaty with India.

Quite sensibly, the government has now reworked the India-Mauritius double taxation avoidance pact to curb its abuse. Genuine investors should be spared of hassles.

All FDI approvals must be automatic to enable the government to swiftly wind up the FIPB. The government should scrap sectoral caps, except in areas such as media where foreign control can skew public discourse, and freely allow foreign capital in all other sectors.

An institutional arrangement should be in place to review any foreign investment proposal that could be a threat to national security. An automatic window does not bar a post facto review.

The US, a top choice for global investors, professes an open investment policy. It has a robust mechanism in place to safeguard national interest and security. The Committee on Foreign Investment in the United States (CFIUS), an interagency panel led .by the Treasury Secretary, can review and block any deal that could lead to the control of any US business or assets by a foreigner that could raise national security concerns.

The-panel's functioning came under scrutiny in 2006 when Dubai Ports World proposed to acquire six American ports.  The deal fell through, but doubts were raised over the lack of transparency in the functioning of the agency.

Some members of the US Congress and others are said to have argued that the change in security and economic concerns after the September 11, 2001, terror attacks were not being reflected enough in the agency's deliberations. The concerns led to the enactment of the Foreign Investment & National Security Act (Finsa), 2007.

Finsa authorises the American president to "suspend or prohibit" any foreign acquisition, merger or takeover of an American corporation that threatens the national security of the US. President Barack Obama used it to block the American firm, Rails Corporation, owned by Chinese nationals, from acquiring a US wind farm energy firm. Prior to that, the CFIUS reportedly thwarted Huawei's purchase of assets from 3 Leaf, a server-maker that went bankrupt, due to security concerns.

 

What, according to the author, should be done to close down FIPB?

A)  The government should make special arrangement to review any foreign investment proposal that could be a threat to national security.

B)  All FDI approvals must be automatic.

C)  The government should scrap sectoral caps in all areas with some exception.

D)  The government should freely allow foreign capital in all other sectors.

E)  All the above