Assistant Provident Fund Commissioner (APFC) 2016 recruitment test, advertisement 170. Transcribed from the Commission's own booklet (series A, B-CRHE-O-PAPA); answer as per the official UPSC final answer key. This question is in Part B. Answer last reviewed 24 August 2026.

Which of the following are the functions of Foreign Investment Promotion Board (FIPB) ? 1. To ensure expeditious clearance of the proposals for foreign investment 2. To review periodically the implementation of the proposals cleared by the Board 3. To undertake all other activities for promoting and facilitating FDI as considered necessary from time to time 4. To interact with the FIPC being constituted separately by the Ministry of Industry Select the correct answer using the codes given below :

(a)1, 2 and 3 only
(b)1, 2 and 4 only
(c)1, 2, 3 and 4
(d)3 and 4 only

Answer

Why

Correct — C, (c) 1, 2, 3 and 4.

All four statements describe functions of the Foreign Investment Promotion Board, and the item is really testing whether a candidate knows what the Board was for beyond the one thing everybody knows about it.

STATEMENT 1 — 'To ensure expeditious clearance of the proposals for foreign investment.' CORRECT, and this was the Board's principal reason for existing. Foreign direct investment into India comes by two routes: the AUTOMATIC ROUTE, where no prior approval is needed and the investor merely reports the transaction afterwards, and the GOVERNMENT or APPROVAL ROUTE, where prior approval is required. The FIPB was the SINGLE WINDOW through which approval-route proposals passed. Speed was the point: before it, an investor had to satisfy several departments separately, and the Board was created to replace that with one inter-ministerial body meeting to a schedule.

STATEMENT 2 — 'To review periodically the implementation of the proposals cleared by the Board.' CORRECT. Clearance is not the end of the matter. An approval is given on the terms proposed — a sector, an equity percentage, a set of conditions — and the Board's mandate extended to seeing whether approvals were acted on and whether the conditions were being observed. The gap between approvals granted and inflows actually received is a standing feature of investment statistics, and reviewing it is what turns a clearance body into a policy instrument.

STATEMENT 3 — 'To undertake all other activities for promoting and facilitating FDI as considered necessary from time to time.' CORRECT. This is the catch-all promotional limb, and its breadth is deliberate. The Board's name contains the word PROMOTION, not merely approval, and the residual function let it take up whatever the circumstances required — clarifying policy, engaging with investors, identifying where approvals were getting stuck. A candidate who thinks of the FIPB purely as a licensing counter will be tempted to reject this statement for being too open-ended, and open-endedness is exactly what such a clause is for.

STATEMENT 4 — 'To interact with the FIPC being constituted separately by the Ministry of Industry.' CORRECT, and the statement that decides this question. The FIPC is the FOREIGN INVESTMENT PROMOTION COUNCIL, a body distinct from the Board, constituted in the Ministry of Industry, chaired by the chairman of ICICI and including the presidents of the principal industry associations, with a member-secretary from the Industry Ministry. Its work was outward-facing — identifying sectors that needed foreign investment, targeting investors and recommending to the Government how to attract more. The Board cleared proposals; the Council went out to generate them, and interaction between the two was written into the arrangement.

So the answer is option (c). The stem reads 'the functions of Foreign Investment Promotion Board (FIPB)' with no article before the Board's name, as the booklet sets it.

Why the others are wrong

(a)1, 2 and 3 only — This accepts the three functions that a candidate can infer from the Board's own name and rejects the one that requires knowledge of a second institution. It is the natural landing place for a reader who takes FIPC to be a misprint of FIPB and rejects the statement as garbled. It is not a misprint: the Board and the Council are two different bodies, differing by one letter in their acronyms because they differ in their last word — Board against Council — and the Council really was constituted separately in the Ministry of Industry. Rejecting a statement because an unfamiliar acronym looks like a typing error is a costly habit; the safer response is to ask whether the unfamiliar body could exist, and here it did.
(b)1, 2 and 4 only — This rejects only the residual promotional function in statement 3, presumably because its wording — 'all other activities ... as considered necessary from time to time' — sounds too loose to be a real mandate. Loose is what it is meant to be. Residual clauses of exactly this shape appear in the terms of reference of most Indian statutory and executive bodies, and they exist so that the body is not confined to an exhaustive list drawn up in advance. Rejecting a function because it is broadly worded rather than because it is wrong is a reliable way to lose a statement-list question.
(d)3 and 4 only — This discards the two core functions and keeps the two peripheral ones, which inverts the Board entirely. Expeditious clearance of foreign investment proposals was the FIPB's reason for existing — it was the single window for the approval route — and periodic review of what it had cleared followed directly from that. An account of the Board that omits approving proposals and monitoring them, while retaining a residual promotional clause and liaison with another body, describes something that is not the FIPB at all.

Concept

The Foreign Investment Promotion Board belongs to the machinery India built for foreign direct investment after the 1991 liberalisation, and the machinery is best learned as a whole.

THE TWO ROUTES. Under the AUTOMATIC route, an investor needs no prior approval and simply reports the investment to the Reserve Bank afterwards; sectoral caps and conditions still apply. Under the GOVERNMENT or approval route, prior clearance is required, and this covers sectors where the State wishes to retain a case-by-case say. Over the three decades since 1991 the direction of travel has been to move more and more sectors from the second route to the first.

THE BOARD. The FIPB was created as a single-window inter-ministerial body to clear approval-route proposals, so that an investor faced one decision rather than several. It moved between departments as policy priorities changed: in 1996 it was placed under the Department of Industrial Policy and Promotion, and it later sat in the Department of Economic Affairs in the Ministry of Finance. Proposals above a stated value went beyond the Board to the Cabinet Committee for decision.

THE COUNCIL. The Foreign Investment Promotion Council was a separate body in the Ministry of Industry, chaired by the chairman of ICICI and drawing in the presidents of the industry associations. Its function was promotion in the marketing sense — identifying sectors that needed investment, approaching investors, and advising the Government on how to attract them. The two bodies divided the work between DECIDING on proposals and GENERATING them.

THE END OF THE BOARD. The FIPB was abolished on 24 May 2017, announced in the Budget speech for 2017-18. Its work was distributed to the administrative ministries and departments concerned with each sector, and applications now go through an online facilitation portal, with the department dealing with industrial policy acting as the co-ordinating point. The reasoning was that by then so few sectors remained on the approval route that a dedicated single-window board was no longer worth its own delay.

A CAUTION ON READING. FIPB and FIPC differ by one letter and it is easy to read the second as an error for the first. They are different institutions with different compositions and different jobs, and the difference in the acronym follows the difference in the last word of the name.

This is a knowledge item rather than a reasoning one, and its difficulty is concentrated in a single statement. Three of the four functions can be reconstructed by anyone who knows what a promotion board does; the fourth requires knowing that a second, differently named body existed alongside it.

That construction is a common one on statement-list questions, and it explains the option set. Option (a) is exactly what a candidate produces by rejecting the unfamiliar acronym, and it is placed first for that reason. The lesson is a general one about how to treat an unfamiliar name inside a statement: an acronym you have not met is evidence about your reading, not about the statement.

The two acronyms are printed exactly as set — FIPB in the stem and in statement 2's reference to 'the Board', FIPC in statement 4 — and they are not the same body. A reader meeting the pair for the first time will reasonably suspect a typing error, and it is worth saying plainly that it is not one. The right-hand column of this page is cropped tight at the outer margin in the source scan, though every line was legible.

There is a further reason the topic recurs on papers of this kind. Foreign investment policy is one of the areas where the institutional machinery has been rebuilt repeatedly since 1991, so the examiner can ask about a body's functions, about where it sat, or about what replaced it, and each version needs the same underlying knowledge of what the body actually did.

Key facts

The Foreign Investment Promotion Board was a single-window inter-ministerial body for clearing foreign direct investment proposals that came under the government or approval route.
FDI comes by two routes: the automatic route, needing no prior approval, and the government route, needing prior clearance; more sectors have been moved to the automatic route over time.
The Board's functions included expeditious clearance of proposals, periodic review of the implementation of proposals it had cleared, and a residual mandate to undertake other activities promoting and facilitating FDI.
The Foreign Investment Promotion Council is a DIFFERENT body, constituted in the Ministry of Industry, chaired by the chairman of ICICI with the presidents of the industry associations as members and a member-secretary from the Industry Ministry.
The Council's role was outward-facing: identifying sectors needing FDI, approaching investors and recommending measures to the Government; the Board decided on proposals while the Council generated them.
In 1996 the FIPB was placed under the Department of Industrial Policy and Promotion; it later sat in the Department of Economic Affairs, Ministry of Finance.
The FIPB was abolished on 24 May 2017, announced in the Budget speech for 2017-18, and its work passed to the administrative ministries with applications routed through an online facilitation portal.

Study next

India's FDI policy architecture: the automatic and government routes, sectoral caps, and the sectors that remain prohibited.The abolition of the FIPB in 2017 and the arrangement that replaced it, including the role of the administrative ministries and the facilitation portal.The Foreign Exchange Management Act, 1999 and the regulations governing investment by non-residents.Foreign direct investment against foreign portfolio investment, and why the distinction matters for the balance of payments.Trends in FDI equity inflows into India by sector and by source country, and the gap between approvals and actual inflows.

Common traps

Rejecting statement 4 because FIPC looks like a misprint of FIPB. They are two distinct bodies, the Board and the Council, with different compositions and different jobs.
Rejecting statement 3 because its wording is open-ended. Residual clauses of that shape are standard in the terms of reference of Indian executive bodies.
Thinking of the FIPB as a licensing counter only. Its name contains 'promotion', and review and promotional work were part of its mandate.
Assuming all foreign investment needed the Board's clearance. Only approval-route proposals did; the automatic route required no prior approval at all.

Institutional items on EPFO papers ask for the functions, the composition or the parent ministry of a named body, and the statement lists usually contain one item that requires knowledge of a SECOND body related to the first. Expect regulators and boards from economic policy — the investment board, the securities regulator, the competition authority, the disinvestment department — and learn each with its parent ministry, its date of creation, its core function and what replaced it if it no longer exists. Where two bodies have nearly identical acronyms, learn both, because the near-identity is itself examinable material.

Related PYQs

EPFO_APFC_2016_Q73

Which of the following trends in FDI inflows are correct ? 1. In 2003 – 04, the FDI Equity inflow percentage growth was negative. 2. From 2004 – 05 to 2007 – 08, the FDI inflows were very high and positive. 3. In 2008 – 09, the FDI inflows were positive, but had decreased relative to the previous year. Select the correct answer using the codes given below :

(a) 1 and 3 only
(b) 1, 2 and 3
(c) 2 and 3 only
(d) 1 and 2 only

Answer(b) 1, 2 and 3

The statement list on trends in FDI equity inflows — the numbers that the machinery described here was built to increase, and the other half of this paper's treatment of foreign investment.

EPFO_APFC_2016_Q119

Statement (I) : Foreign investment may affect a country's export performance. Statement (II) : Inflow of foreign exchange may cause appreciation of local currency leading to a rise in the price of export commodities.

(a) Both Statement (I) and Statement (II) are individually true and Statement (II) is the correct explanation of Statement (I)
(b) Both Statement (I) and Statement (II) are individually true but Statement (II) is not the correct explanation of Statement (I)
(c) Statement (I) is true but Statement (II) is false
(d) Statement (I) is false but Statement (II) is true

Answer(a) Both Statement (I) and Statement (II) are individually true and Statement (II) is the correct explanation of Statement (I)

The Assertion-Reason item on foreign investment affecting a country's export performance, which asks what inbound investment is expected to achieve rather than how it is cleared.

Practice

practice — not a real PYQ
Under India's foreign direct investment policy, an investment made under the automatic route requires
- (a)prior approval of the administrative ministry concerned
- (b)no prior approval, but reporting to the Reserve Bank of India after the investment
- (c)prior approval of the Cabinet Committee on Economic Affairs
- (d)no approval and no reporting of any kind
Answer(b) no prior approval, but reporting to the Reserve Bank of India after the investment — the automatic route dispenses with prior clearance while leaving sectoral caps, conditions and post-facto reporting in place. Prior approval is required only under the government route, which the Foreign Investment Promotion Board once administered as a single window.
practice — not a real PYQ
The Foreign Investment Promotion Board was abolished in
- (a)2014
- (b)2016
- (c)2017
- (d)2019
Answer(c) 2017 — the Board was abolished on 24 May 2017, following the announcement in the Budget speech for 2017-18. Its work was distributed to the administrative ministries and departments concerned with each sector, with applications routed through an online facilitation portal.

Why