Is the government in India doing enough for overseas investors to consider India?
The efforts of centre and states, and regulators to bring more transparency, offer better governance, one stop clearance to investment proposals and rationalizing tax structure are quite significant, points out an SBI research note
While there is scepticism among overseas investors as to whether the government in India is doing enough to attract investment into Indian shores, SBI (State Bank of India), in a research note feels that many things have been done under reforms and these should not be ignored.
In spite of some challenges facing the World Economy, the efforts made by the Governments (Centre and States), and Regulators (RBI) to bring more transparency in system and procedures, good governance, one stop clearance to investment proposals and rationalizing tax structure so far are quite significant, points out the SBI research note.
In the banking sector, there is a plan to revamp public sector banks under ‘Indradhanush’. In the insurance sector, FDI (foreign direct investment) limit has been increased to 49%. Social Security Schemes, Jan Dhan to Jan Suraksha, have been added to the finance sector and the achievements are impressive. According to the government, 18.34 crore bank accounts have been opened under PMJDY and 15.98 crore Rupay cards issued; 8.59 crore Suraksha Bima policies, 2.81 crore Jeevan Jyoti Bima Policies and 7.68 lakh Atal Pension Policies have been issued.
Under ‘Ease of doing business’ the following proposals have been put in place:
(a) New de-licensing and de-regulation measures for reducing complexity, and significantly increasing speed and transparency. Process of applying for Industrial Licence made online on 24x7 basis through eBiz portal. Validity of Industrial license extended to three years.
(b) Major components of Defence products’ list excluded from industrial licensing.
(c) Process of obtaining environmental clearances made online.
(d) Digitization and online processing of various activities relating to SEZ Developers and Units introduced in all Zones.
(e) Withdrawing excise and customs duty exemptions presently available to goods manufactured and supplied to Ministry of Defence by Ordinance Factory Board and Defence PSUs.
(f) Promoting the participation of private sector, particularly SMEs for Defence Manufacturing, Outsourcing and Vendor Development Guidelines for DPSUs and Ordnance Factory Board (OFB) have also been formulated.
In the field of communication and information technology, the government’s new policies include:
(a) Digital India programme to make technology central to enabling change and transforming the country into a digitally empowered knowledge economy. It includes various schemes worth over Rs1 lakh crore like Digital Locker, e-education, e-health, e-sign and national scholarship portal. BharatNet in 11 states and Next Generation Network (NGN), are a part of Digital India campaign.
(b) MyGov.in implemented as a platform for citizen engagement in Governance, through a “Discuss”, “Do” and “Disseminate” approach. The mobile app for MyGov would bring these features to users on a mobile phone.
With an aim to achieve “inclusive growth”, the Smart City Mission promotes integrated city planning, where the Government’s Policies such as Swachh Bharat Mission and Atal Mission for Rejuvenation and Urban Transformation complement each other.
Deregulation of diesel prices was announced on 18th October, 2014. The saving in subsidy is available for funding anti-poverty and social sector scheme.
RBI has issued 2 banking licenses (Bandhan & IDFC), 11 Payment Bank and 10 Small Finance Bank (SFB) licences. The new banks will help in providing banking facilities to the unbanked sections of the people. The payment banks will reach customers mainly through their mobile phones, the cheapest technology available globally, rather than traditional bank branches.
Some of the recommendations of the Expert Committee to Revise and Strengthen the Monetary Policy Framework (Chairman: Dr. Urjit R. Patel) have been implemented including adoption of the new CPI (combined) as the key measure of inflation, explicit recognition of the glide path for disinflation, transition to a bi-monthly monetary policy cycle, progressive reduction in access to overnight liquidity under the LAF at the fixed repo rate and corresponding increase in access to liquidity through term repos and introduction of longer tenor term repos.
In order to tackle the NPAs (non-performing assets), RBI has provided a mechanism to bankers to recover bad loans. The RBI has allowed banks to acquire 51% or more stake in companies defaulting after restructuring their loans. Measures announced under the new scheme ‘Strategic Debt Restructuring’ (SDR) include allowing lenders to convert debt into equity within 30 days of review of companies’ accounts. In addition, lenders acquiring shares of listed companies under restructuring would be exempted from making open offers.
In conclusion, it is felt that overseas investors would do well to study the reforms in place and start business in right earnest rather than wait for the next set of favourable measures in government policy.