In a major effort to attract domestic and foreign investors, the government on Wednesday decided to set up an Investment Commission.

Announcing the decision of the Cabinet Committee on Economic Affairs, Finance Minister P Chidambaram said: "The commission will be located in the finance ministry and will enjoy operational autonomy and government support."

This puts at rest speculation that the commission could be set up in the Department of Industrial Policy and Promotion after the Commerce and Industry Minister Kamal Nath sent a note in this regard.

The decision to house the commission in the finance ministry as proposed in the Budget was taken by Prime Minister Manmohan Singh himself.

The commission, which will be constituted initially for three years, will comprise a chairperson, two members and three professional groups and will be established by the Department of Economic Affairs within two months.

Chidambaram said all policy decisions emerging from the recommendations of the commission will go to the CCEA for approval.

Giving details of the terms of reference, an official spokesperson said the commission will recommend to the government both on policy and procedures to facilitate greater foreign direct investment flows into India.

It will endeavour to secure a certain level of investment every year and review progress at the end of every quarter.

The commission will seek meetings and visit industrial groups and houses in India and large companies abroad in sectors where there was dire need for investment.

It will also endeavour to reduce gap between proposals and projects under implementation and quicken the pace of investments.

The main purpose of the commission is to make the country attractive for investors considering the growing competition for investment globally.