Govt launches new initiatives to attract investments

The Central Government is determined to build an investor-friendly ecosystem that supports domestic investors as well as FDI and will boost the economy manifold

June 5, 2020

An Empowered Group of Secretaries (EGoS) has been set up to attract investments in India. This new mechanism is aimed at reinforcing India’s vision of becoming a US$5 trillion economy by 2024-25

A Project Development Cell (PDC) has been set up for the development of investible projects in coordination between the Central and State Governments. This is expected to increase FDI inflows into India

An upward revision in the definition and criteria of MSMEs, which come into effect on July 1, 2020, is expected to open up avenues of fresh financing and new markets for India’s grassroots entrepreneurs

The Government has introduced a stimulus package worth nearly Rs.21 trillion (US$277 billion), equivalent to around 10% of India’s GDP, to aid the people worst hit by the pandemic and boost the economy

The Government of India has taken a host of measures to ensure the country’s return to normalcy after the crippling impact of the global pandemic of Coronavirus (COVID-19). The Central Government in May introduced a stimulus package worth nearly Rs.21 trillion (US$277 billion), equivalent to around 10% of India’s GDP, to aid the people worst hit by the pandemic and open up new avenues of trade, investment, and employment in the economy. An extensive set of reform and relief measures are being enforced as part of the stimulus package that will help boost equitable growth in post-Coronavirus India. Improved liberalisation, policy amendments, relaxed regulations, infrastructure investment, skill development, etc, are being targeted to build a future-ready India. However, a strong and futuristic economy can be built only with the active cooperation of India’s global partners. To that end, the Central Government has set up an “Empowered Group of Secretaries (EGoS) and Project Development Cells (PDCs)” in different Ministries and Departments to attract fresh investments into India.

Empowered Group of Secretaries (EGoS)

The Union Cabinet on June 3 approved the setting up of an “Empowered Group of Secretaries (EGoS) for attracting investments in India. This new mechanism is aimed at reinforcing India’s vision of becoming a US$5 trillion economy by 2024-25. The Central Government is determined to build an investor-friendly ecosystem that supports the domestic investors as well as FDI and will boost the economy manifold. Meanwhile, the Department for Promotion of Industry and Internal Trade (DPIIT) has proposed strategic implementation of an integrated approach to bring about synergies between different Ministries and Departments and among the Central and State Governments in investment and related policies. These steps are expected to help India take advantage of opportunities in the post-COVID-19 world as large multinationals seek to diversify their investments into new geographies and mitigate risks. This will also help India expand its contribution to the global value chain. Additionally, ramping up production across product lines will help India serve big markets in the Americas, Europe, among others. 

Objectives of EGoS:

  • To bring in synergies and ensure timely clearances from different Departments and Ministries.
  • To attract increased investments in India and provide investment facilitation to global investors.
  • To facilitate investments in a targeted manner and to usher policy stability in the environment.
  • To evaluate investments put forward by the departments on the basis:
    • Project creation 
    • Actual investments
  • Departments would be given targets for completion of various stages by the Empowered Group.

After 14 years of the introduction of the MSME Development Act, the Union Ministry of Micro, Small and Medium Enterprises (MSMEs) approved an upward revision in the definition and criteria of MSMEs in the country

Project Development Cells (PDCs)

The Union Cabinet on June 3 also approved the setting up of a Project Development Cell (PDC) for the development of investible projects in coordination between the Central and State Governments. This is expected to grow the pipeline of investible projects in India and in turn increase FDI inflows. The Cell is expected to make India a more investor-friendly destination and give a fillip to the mission of building a robust economy as envisioned by the Prime Minister by further smoothening investment inflows into the country. This will give a boost to the socio-economic development of the nation and open up immense direct and indirect employment potential in various sectors. FDI equity inflow during the financial year 2019-20 was reported at around US$50 billion, marking an increase of 13 per cent from the previous year. Driven by policy reforms and easing of regulations, foreign investment inflow has been on a steady rise since 2014. An increasing number of foreign enterprises, from a vast range of industries, have turned to India for more high-end R&D and manufacturing-driven solutions. 

Objectives of PDC:

  • To create projects with all approvals, land available for allocation, and with complete Detailed Project Reports for adoption/investment by investors.
  • To identify issues that need to be resolved in order to attract and finalise investments and put forth the concerns before the Empowered Group.

A reboot of India’s MSME industry

After 14 years of the introduction of the MSME Development Act, the Union Ministry of Micro, Small and Medium Enterprises (MSMEs) approved an upward revision in the definition and criteria of MSMEs in the country in May. The new norms of classification for MSMEs, which come into effect on July 1, 2020, is expected to open up avenues of fresh financing and new markets for India’s grassroots entrepreneurs. 

Here are the revised changes in the definition and criteria of MSMEs.

  • The definition of a micro-manufacturing and services unit was raised to Rs.10 million of investment and Rs.50 million of turnover. 
  • The limit of small manufacturing and services units was raised to Rs.100 million of investment and Rs.500 million of turnover. 
  • The limit of a medium manufacturing and services unit was increased to Rs.200 million of investment and Rs.1 billion of turnover. 
  • On June 1, on industry requests, the definition of medium entities was raised to Rs.500 million of investment and Rs.2.5 billion of turnover.
  • The MSME reform has also done away with the separation of manufacturing and services enterprises to serve current requirements.
  • A new criterion for calculating turnover has been introduced that will exclude exports from turnover to help MSMEs export more. 
  • This is expected to exponentially add to exports from the country leading to more growth and economic activity and creation of jobs.

The Ministry of MSME has put in place a strong handholding mechanism for MSMEs and grassroots entrepreneurs in the name of Champions (www.champions.gov.in).

These mechanisms will offer guidelines to investors (Indian and foreign) on leading opportunities in India and the economy’s strengths to ensure the best experience while directing Indian businesses of all sizes to augment their capabilities to match the demands of the post-Coronavirus market. The integrated approach is expected to empower all stakeholders in India-led global trade and investment.