Enabling legislations, financial and procedural incentives, and business opportunities for investors
- Today, economy of India is the seventh largest in the world by nominal Gross Domestic Product (“GDP”) and third largest by purchasing power parity and the annual growth rate of GDP has been 7.3% from 2011 to 2015.
- The country is classified as a newly industrialised country , one of te G-20 major economies , a member of BRICS and a developing economy with an average growth rate of approximately 7% over the last 2 decades.
- One of the significant consequences of this growth has been the transformation of a primarily agrarian economy into service and industry oriented economy.
- These changes have also led to India emerging as a global center for information technology and information technology enabled services like business process outsourcing.
- Manufacturing cost competitiveness has contributed to India becoming attractive destination for outsourcing industrial production, particularly for specialty manufacturing.
- Recent global developments have demonstrated that India’s strong fundamentals and robust domestic consumption levels make it a resilient economy that can withstand global economic slowdown and declining consumption levels.
Ease of doing business
- Ease of Doing Business is one of the important initiatives run by the Government and is crucial to the success of various initiatives such as Make in India, Start-up India, Digital India, etc.
- In the current global environment, where capital is scarce and there are countries competing for attracting the same capital, it is important to make India an investor-friendly destination.
- The first step toward this objective is to do away with multiple procedures, rules, regulations and red tape and bring more transparency and clarity in policies.
- Key initiatives undertaken by the Central Government for ease of doing business in India are highlighted hereunder:
Central Government Initiatives for Ease of doing business
Facilitating investments
- Investor Facilitation Cell established to provide primary support for all investment queries and for providing handholding and liasioning services to investors
- Dedicated Japan Plus Cell established to facilitate and speed up investment proposals and augment economic ties between India and Japan
- Dedicated desk established to facilitate and speed up investment proposals and augment economic ties between India and Korea, China, Canada, the US
- E-Biz: A single-window online portal, where any investor looking to start a new business or establishing a new industrial unit, can avail core services needed to obtain necessary clearances, licenses, complete mandatory tax registrations and regulatory filing that are required to operate the business/industrial unit
- Checklist with specific time-lines has been developed for processing all application filed by foreign investors in cases relating to Retail/ NRI/ Export oriented units
- Investments in LLP opened up to foreign investors in specific sectors.
Simplification in administration of labor laws
- Shram Suvidha — Multiplicity of labor laws and the difficulty in their compliance had always been cited as an impediment to industrial development. In order to redress the same, Government launched an online portal Shram Suvidha, which is expected to facilitate:
- Ease of reporting at one place for various labor laws
- Consolidated information of labor inspection and its enforcement
- Allotment of Labour Identification Number (LIN) to units to facilitate online registration and filing of returns
- Real time registration with Employee State Insurance Corporation (ESIC) and Employee Provident Fund Organisation (EPFO)
Simplifying operation of business in India
- Curbing the need of Consent to Establish/No Objection Certificate (NOC) letter for new electricity connections.
- Online application and monitoring for environmental and forest clearances.
- Simplification in obtaining industrial licenses:
- Simplified forms for obtaining industrial licence and Industrial Entrepreneurs Memorandum (IEM)
- Granting security clearance on Industrial License applications within 12 weeks by Ministry of Home Affairs
- Dual use items (defence and civilian items) unless classified as defence items, will not require industrial licenses
- Initial validity period of industrial licenses has been increased to three years from two years to enable procurement of land and obtain necessary clearances/approvals from authorities
- Frequently asked questions (FAQs) have been developed and uploaded on Department of Industrial Policy & Promotion (DIPP) website
- Reduction in the mandatory documents required for import and export of goods from eleven to three
Simplification of various compliance under the Companies Act
- The Ministry of corporate affairs constituted the Companies Law Committee in June 2015 to examine and make recommendations on the issues arising out of implementation of the Companies Act, 2013.
- The committee suggested nearly 100 amendments to the new Companies Act to make it easier to do business in India. This includes for simpler laws to incorporate a company and to raise funds, as well as for insider trading and dealings with top executives
- The Companies Amendment Act, 2015 has been passed to remove requirements of minimum paid-up capital and common seal for companies and certificate of commencement of business for private companies.
- Introduction of integrated process of incorporation wherein the name of the company can be simultaneously obtained with application for Directors Identification Number (DIN)
- Single process for incorporation of company, allotment of Permanent Account Number (PAN) and Tax deduction Account Number (TAN)
Moving in line with the Central Government and to attract investment in the states, the State Government took various steps to ease the governance. State government initiatives taken are highlighted hereunder:
State Government initiatives Ease of doing business
Gujarat:
- Online consent system for environment clearances
- Geographic Information System (GIS)-based land identification system
Maharashtra:
- Unified process with single identification for Value Added Tax and Professional Tax registration
- Time required for getting an electricity connection has been reduced to 21 days from 67 days and procedures involved has been cut down to 3 from existing 7
- Commercial benches established in Bombay High Court to settle high value commercial disputes
Punjab:
- Creation of “Invest Punjab”, as a one-stop clearance system for investment projects
- Exemption to 131 industries from consent requirement by Pollution Control Board
Delhi:
- Real time allotment of Tax Identification Number (TIN)
- Commercial benches established in Delhi High Court to settle high value commercial disputes
- Procedure and time required for new electric connection reduced.
- Online portal for construction permits for residential, industrial, institutional and commercial buildings
Chhattisgarh:
- Online consent and monitoring system to obtain environmental clearances
- Validity of consent obtained also extended
Puducherry:
- Green industries exempted from inspection by Pollution Control Committee
Karnataka:
- Checklist for 86 government services and delivery timelines across 23 departments/organizations made available on Karnataka Udyog Mitra, an online portal to facilitate investment in the state
Uttarakhand:
- Replacement of static check posts established by the commercial tax department for checking of the goods at the point of their import into the state with mobile squads
Boost to manufacturing through “Make in India”
- Launched in September 2014, the Make in India initiative aims to achieve long-term sustainable growth of 10% in manufacturing.
- The overall aim is to build best-in-class manufacturing infrastructure by enabling investments, boosting innovation, encouraging skill development and strengthening intellectual property protection.
- This initiative focuses on 25 sectors.
Key highlights:
- The Government is pushing for import substitution by encouraging local manufacturing of up to 181 imported products
- New reforms have been introduced for the labor market, including a single-window labor compliance process for industries, more user-friendly provident fund facilities, and a new inspection scheme
- The Department of Industrial Policy and Promotion (DIPP) is encouraging advanced manufacturing by deregulating a large number of products such as defense items, from the purview of industrial licensing
- The Government has eased FDI limits in several high value-added sectors such as telecom, retail, defense, construction and railways
“Digital India” initiative to drive technology sector in India
- Digital India is a US$17.7b (INR1.13t) government initiative, which aims to create an electronically connected economy, attract investment in electronics manufacturing, create millions of jobs and support trade.
Key highlights:
- Under the “Digital India” initiative, also known as “e-Kranti,” the Government aims to provide digital access to all citizens in both urban and rural areas. The initiative is expected to add US$1t to the economy by 2025
- It seeks to expand rural internet coverage from 130,000 villages to 250,000 villages by 2017
- The Government has allocated US$0.4b (INR25.1b) for the project in the FY16 budget. It also plans to invest US$75–84m to provide basic computer education with the assistance of private companies
- As a result of this initiative, there exist several opportunities in the fields of IT services (hardware and software), shared service centers, knowledge services, data analytics, mobile and wireless services, business process management and IT consulting
Pradhan Mantri Jan Dhan Yojana (PMJDY): financial access for every citizen
- PMJDY is a national mission, which was launched with the objective to provide banking and financial services to all sections of the society in an affordable manner.
- These services include banking/savings and deposit accounts, remittance, credit, insurance and pension.
Key highlights:
- PMJDY aims to ensure that at least one member in every Indian household has a bank account and an insurance cover of INR100,000
- The campaign aims to cover 75m households and provide a wide range of financial services to all citizens by tapping the unbanked population in the country
“Startup India, Standup India” initiative to help boost entrepreneurship
- Launched in January 2016, this initiative aims to boost start-up ventures as a means to promote entrepreneurship and job creation in India.
Key highlights:
- It provides incentives such as three-year income tax exemption and concessions on capital gains tax to start-up ventures
- Under the initiative, the GOI will create a fund worth INR100b (US$1.5b) to back startups
- The GoI has announced the establishment of a Startup India Hub, which act as a single point of contact for interactions with the government
- The initiative entails the establishment of the Atal Innovation Mission (AIM) for promotion of R&D including 500 tinkering labs, 35 public-private sector incubators, 31 innovation centers at national institutes, 7 new research parks and 5 new bio-clusters
Other recent programs:
- In April 2015, the GoI unveiled a new Foreign Trade Policy (FTP), which targets to nearly double India’s exports to US$900b by 2020. Five existing schemes to promote merchandise exports have been brought under a single Merchandise Exports from India Scheme (MEIS). The Served From India Scheme (SFIS) has been replaced by the Service Exports from India Scheme (SEIS)
- Jan Dhan Yojana, Aadhaar and Mobile number (JAM) trinity has been launched to deliver direct benefits to India’s poor and keep inefficient distribution of subsidies under control
- In May 2015, the GoI also launched a single form called INC-29, which will replace the eight forms that had to be filed earlier to start a business
- Skill India aims to provide high-quality education and training to 500m Indian youngsters by 2020
- Other initiatives include the Payments and Settlement Systems (Amendment) Bill 2014, which aims to address the insolvency issue in the payment and settlement system as well as the Right to Fair Compensation and Transparency in Land
- Acquisition, Rehabilitation and Resettlement (Amendment) Second Bill 2015, which would help in expediting infrastructure projects
- The Government launched an “e-biz” portal in February 2015 that integrates 14 regulatory permissions in one place to facilitate easy approvals. Over time, all state and central government-to-business (G2B) services will be integrated to the portal in a bid to further ease doing business in India
Investment Opportunities in India
India provides great avenues for investments in various sectors
- Automobile
- Automobile Components
- Aviation
- Biotechnology
- Cement
- Chemicals
- Construction
- Defence Manfacturing
- Education
- Electrical Machinery
- Electronic Systems
- Food processing
- Gems & Jewellery
- Healthcare
- Heavy Industry
- IT & BPM
- Leather
- Media & Entertainment
- Mining
- Oil & Gas
- Pharmaceuticals
- Ports
- Railways
- Renewable Energy
- Retailing
- Roads & Highways
- Space
- Steel
- Telecommunications
- Textiles and Garments
- Thermal Power
- Tourism and Hospitality
- Wellness
Make In India Programme
ABOUT THE PROGRAM
- The Make in India initiative was launched by Prime Minister in September 2014 as part of a wider set of nation-building initiatives.
- Devised to transform India into a global design and manufacturing hub, Make in India was a timely response to a critical situation: by 2013, the much-hyped emerging markets bubble had burst, and India’s growth rate had fallen to its lowest level in a decade.
- The promise of the BRICS Nations (Brazil, Russia, India, China and South Africa) had faded, and India was tagged as one of the so-called ‘Fragile Five’.
- Global investors debated whether the world’s largest democracy was a risk or an opportunity.
- India’s 1.2 billion citizens questioned whether India was too big to succeed or too big to fail. India was on the brink of severe economic failure.
PROCESS OF MAKE IN INDIA
- Make in India was launched by Prime Minister against the backdrop of this crisis, and quickly became a rallying cry for India’s innumerable stakeholders and partners.
- It was a powerful, galvanising call to action to India’s citizens and business leaders, and an invitation to potential partners and investors around the world. But, Make in India is much more than an inspiring slogan.
- It represents a comprehensive and unprecedented overhaul of out-dated processes and policies.
- Most importantly, it represents a complete change of the Government’s mindset – a shift from issuing authority to business partner, in keeping with Prime Minister’s tenet of ‘Minimum Government, Maximum Governance’.
PLAN FOR MAKE IN INDIA
- To start a movement, you need a strategy that inspires, empowers and enables in equal measure.
- Make in India needed a different kind of campaign: instead of the typical statistics-laden newspaper advertisements, this exercise required messaging that was informative, well-packaged and most importantly, credible.
- It had to
- Inspire confidence in India’s capabilities amongst potential partners abroad, the Indian business community and citizens at large;
- Provide a framework for a vast amount of technical information on 25 industry sectors; and
- Reach out to a vast local and global audience via social media and constantly keep them updated about opportunities, reforms, etc.
- The Department of Industrial Policy & Promotion (DIPP) worked with a group of highly specialised agencies to build brand new infrastructure, including a dedicated help desk and a mobile-first website that packed a wide array of information into a simple, sleek menu.
- Designed primarily for mobile screens, the site’s architecture ensured that exhaustive levels of detail are neatly tucked away so as not to overwhelm the user.
- 25 sector brochures were also developed: Contents included key facts and figures, policies and initiatives and sector-specific contact details, all of which was made available in print and on site.