Government May Eliminate FDI Security Gaps Through Scrutiny Measures

A proposal has been put forward by the Department for Promotion of Industry and Internal Trade (DPIIT) for an online filing of advance overseas investment returns on the Foreign Investment Facilitation Portal (FIFP), which will be accessible by the Reserve Bank of India (RBI), the Ministry of Home Affairs, and other concerned security agencies.

This proposal came after a concern over rising foreign direct investment (FDI) equity inflows into strategic sectors like telecom as well as information technology (IT) and IT-enabled Services (ITeS) through the automatic route for approval. The government of India is considering eliminating the security gaps through a stringent scrutiny mechanism.

This has given rise to concerns of national security. The government is concerned that a transfer of data from India, through information technology investment, may threaten national security. Apart from this, it has been notices that very little information comes to the government from foreign direct investment flowing through the automatic route.

“There has been a rise in investment coming into strategic sectors. Besides, 100 per cent FDI is allowed in the IT/ITeS sectors under the automatic route. This leads to a transfer of personal data of Indian citizens, which may be exploited in a manner that threatens government security”, said an official according to Business Standard.

“The FIFP could be linked to the RBI’s foreign investment reporting and management system portal, where all foreign investors will be required to provide information. In case of no objection, the FDI proposal will be through the automatic or approval route,” said another official.