June 5, 2020
The priority is keeping India on track as one of the world’s fastest growing economies so it can become the second largest economy in the world by 2050
India aims to expand the reach of the formal economy, thereby improving the informal sector’s efficiencies and increasing the country’s tax base
While the process of starting a business has already been simplified, the Government will continue to reduce the number of procedures required and the time taken for approvals
The World Bank’s latest Ease of Doing Business ranks India at 63rd position among 190 countries in 2019, an improvement of 14 places as compared to 2018.
The Government of India has the twin objectives of inclusive growth and financial empowerment as the centerpiece of its policy agenda for the country’s growth. It has implemented a range of policy initiatives in the areas of sustainable development, infrastructural improvements, ease of doing business, banking and financial services, job creation, digital transformation, manufacturing and services industries in an effort to build a strong base for the Indian economy. Understanding the importance of creating a nurturing ecosystem for business and entrepreneurship, policies have been designed to ease the entry of foreign direct investment (FDI), streamlining the financial system, dismantling redundant procedures and adding transparency to the process of doing business. Further, the Government has been steadily laying the groundwork for a digital and technology-enabled economy to achieve two objectives: 1) To prepare India for the future; and 2) To expand the reach of the formal economy, thereby improving informal sector’s efficiency and increasing the country’s tax base.
The Government of India has implemented more than 7,000 business-oriented reforms in the past few years. The introduction of the Goods and Services Tax (GST) in 2017 was the most momentous as it drastically simplified a complex system of taxation, replacing it with a unified nation-wide single tax regime, making it much easier to do business all across India. Now, filing of taxes is also being done electronically through an online portal.
The FDI policy has been amended to ease the way for overseas investors to access many more sectors including defense and aviation, while also simplifying the clearance process by eliminating the need for a second level of approval in cases where licences have already been procured. Regulations that require unnecessary and repetitive business licence renewals have been scrapped and the validity period of business licences has been extended from three years to seven years.
Foreign investors are also now permitted to invest in construction projects that were earlier reserved for domestic companies. Certain sectors reserved for small and medium-sized enterprises (SMEs) have now been opened to larger entities. Revised bankruptcy laws have been implemented to encourage a free flow of capital and more flexibility and options for investment.
Policy reform is a continuous process, and an important pillar of India’s strategy to become part of the global supply chain. In August 2019, the Government cleared a number of changes in foreign direct investment (FDI) regulations, including easing rules for overseas single-brand stores and permitting FDI through the automatic route in contract manufacturing (including in electronics and pharmaceuticals) and all areas of coal mining as well as sale and export of coal.
Now emerging from over two months of national lockdown due to the Coronavirus pandemic (COVID 19), the Government’s priority is to keep India on track as one of the world’s fastest-growing economies, so it can achieve its potential of becoming the world’s second-largest economy by 2050.
To get back on the growth path, the Government has announced a stimulus package worth nearly Rs.21 trillion (US$277 billion), equivalent to around 10 per cent of India’s GDP, to aid the sections of the society worst hit by the pandemic and open up new avenues of trade and investment in the post-Coronavirus economy.
The initiatives seek to boost India’s socio-economic strengths while bolstering the capabilities of key industries, empowering India and her global partners in a post-COVID-19 global economy. The reforms have focussed on Land, Labor, Liquidity, Laws, among other key factors, to drive economic growth. The package aims to strengthen cottage industries and MSMEs while making it easier for foreign traders and investors to engage with India. The stimulus package asserts the Government’s commitment to delivering economic prosperity in uncertain times.
In the past few years, India has moved into the top 100 in the World Bank’s Ease of Doing Business index; the Government aims to take country to the first 50 and has set in motion a detailed plan with specific objectives towards this end. For example, while the process of starting a business has already been simplified, it will continue to reduce the procedures required and the time taken for approvals. Like the GST portal, the Government will set up a portal to facilitate the payment and management of employee-related pension and taxes.
On the trade front, the cost and time for imports and exports is being reduced significantly. A tribunal to implement the new insolvency and bankruptcy provisions will be fast-tracked. E-courts will be tasked with enforcing contracts in an expedited manner by provided an electronic system to handle complaints, summons, and payments. These are just some of the more visible priorities to continue the Government’s agenda of making India a great place for business.
The World Economic Forum’s 2019 Global Competitiveness Report, ranks India as the best peformer in South Asia region, and 68th among 141 countries globally, down 10 places since 2018. Further, India was placed at 63rd position in 2019 on World Bank’s Ease of Doing Business Index, an improvement of 14 places from its 77th position in 2018. For the third consecutive year India was among the top 10 economies where the business climate has improved the most.
The Government of India will continue to focus on its progressive and development-based agenda. With a well-functioning democracy that has the youngest population in the world, high literacy rates and an expanding middle-class, India offers real and exciting opportunities for investors and corporations looking for a welcoming and effective partner.
To access the comprehensive list of Government of India’s as well as state level policy documents, please visit India.gov.in.