The Union Budget 2023-24 has unveiled a comprehensive blueprint to steer India’s economy towards greater growth and prosperity.
This budget aims to streamline bureaucracy, maximize growth, and strike a delicate balance between effectiveness, fairness, and consistency.
1. Pro-Investment Policies: In recent years, the Indian government has introduced a series of industry-friendly policies, including:
- Production-Linked Incentive (PLI) schemes,
- Remission of Duties and Taxes on Exported Products (RoDTEP),
- The ambitious PM Gati Shakti project. These initiatives not only encourage investment but also facilitate smoother business operations.
2. Infrastructure Development:
The government has initiated projects like:
- India Industrial Landbank
- National Logistics Policy
- National Single Window System
Is positioning India as an attractive destination for both investment and business operations. These infrastructure developments are pivotal in creating a conducive environment for foreign businesses.
3. Competitiveness at the Sub-National Level:
The Department for Promotion of Industries & Internal Trade (DPIIT) launched the Business Reform Action Plan (BRAP) exercise in 2014, ranking states and union territories based on designated reform parameters. This initiative fosters healthy competition among regions, promoting business-friendly policies across the country.
4. Global Business Rankings: As a result of these proactive efforts, India’s position in the World Bank’s Doing Business rankings has significantly improved, climbing from 142 in 2014 to 63 in 2023. India has made progress in seven out of the ten assessed parameters, showcasing its commitment to improving the ease of doing business.
5. Simplifying Compliance: The Union Budget 2023-24 emphasized the reduction of over 39,000 compliances and the decriminalization of more than 3,400 legal provisions. This move is a significant step toward promoting trust-based governance and fostering a business-friendly environment.
6. Streamlined Processes: The Jan Vishwas Bill, introduced by Finance Minister Nirmala Sitharaman, aims to amend 42 Central Acts, simplifying business operations. The use of the Permanent Account Number (PAN) as a common business identifier across government agencies, along with an integrated system of unified filing processes at the central and state levels, will further expedite business processes.
Some improvements to ease of doing business in India in 2023 include:
- Reducing over 39,000 compliances
- Decriminalizing over 3,400 legal provisions
- Launched the National Single Window System (NSWS) in September 2021
- Introducing the Insolvency and Bankruptcy Code (IBC)
Key Takeaways to be noted:
- Economic Growth Catalyst: A country’s business regulatory environment plays a pivotal role in its economic growth, and India’s consistent efforts to improve this environment have unlocked its economic potential. This presents unprecedented opportunities for both domestic and foreign businesses.
- Localizing Opportunities: The “Make in India” and “Vocal for Local” campaigns have been instrumental in promoting local manufacturing and businesses. These initiatives encourage foreign companies to invest in India while fostering the growth of domestic enterprises.
- Government-Industry Synergy: The Indian government’s initiatives showcase a strong commitment to creating a symbiotic relationship with industry players, making India a conducive destination for foreign businesses looking to expand their operations.
The government is also working to ensure minimum wages and timely payment of wages, promote industrial harmony and collective bargaining, and protect workers’ health and safety.
Some key FDI initiatives by India include:
1. Automatic Route: India has significantly liberalized the FDI regime by allowing investments in many sectors through the automatic route. Under this route, foreign investors do not require prior government approval for investments. This has simplified and expedited the investment process.
2. Sectoral Caps and Conditionalities: While the automatic route is applicable to many sectors, certain sectors have caps on FDI or specific conditions. These sector-specific conditions are outlined in the Consolidated FDI Policy, which is regularly updated to provide clarity on investment limits and requirements in different sectors.
3. FDI in Single-Brand Retail: India has permitted 100% FDI in single-brand retail, subject to certain conditions, such as mandatory sourcing of a certain percentage of goods from India. The government has also relaxed local sourcing norms for companies that sell products with cutting-edge technology.
4. FDI in Multi-Brand Retail: In multi-brand retail, India allows up to 51% FDI, subject to strict conditions. The government has given more flexibility to state governments to decide whether they want to allow FDI in multi-brand retail within their respective states.
5. FDI in E-Commerce: FDI in e-commerce is permitted but with certain restrictions. For instance, e-commerce marketplaces are not allowed to hold inventory, and there are guidelines regarding the percentage of sales from a single seller.
6. Attracting Investments in Infrastructure: The government has eased FDI norms in sectors like construction and development, civil aviation, and railways. This has led to increased foreign investment in infrastructure development projects.
7. Relaxation of Entry and Exit Norms: The government has relaxed entry and exit norms for foreign investors, making it easier for them to invest and divest. It has also permitted partial exits and the transfer of stakes in joint ventures.
8. Reforms in Defence and Aerospace: India has raised the FDI limit in the defence sector to 74%, allowing foreign companies to have a controlling stake. In the aerospace sector, 100% FDI is permitted in projects related to the manufacture of aircraft and helicopters.
9. Real Estate Sector: The real estate sector has seen relaxed FDI rules, particularly in the construction development projects and townships. The minimum capitalization requirements have been lowered and exit norms have been eased.
10. Startups and Small Businesses: India has introduced initiatives to boost FDI in startups and small businesses. Measures like allowing convertible notes, relaxing compliance requirements, and creating a more favourable tax environment for startups have attracted foreign investment.
These FDI initiatives are part of India’s ongoing efforts to make the country a more attractive destination for foreign investors and promote economic growth and job creation through increased foreign direct investment.
In conclusion, the Indian government’s proactive approach, business-friendly policies, and infrastructure development have paved the way for foreign businesses to thrive in India. These initiatives not only enhance India’s global competitiveness but also create a win-win situation for domestic businesses, multinational companies, and the government.
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Department for Promotion of Industry and Internal Trade (DPIIT): DPIIT is the primary government department responsible for formulating and implementing policies related to industrial development and foreign investment in India. Their official website (https://dpiit.gov.in/ ) contains information on various policies and initiatives.
Reserve Bank of India (RBI): RBI is India’s central bank, and it plays a crucial role in regulating foreign investments and the financial sector. Their website (https://www.rbi.org.in/) provides information on FDI regulations and data related to foreign investments.
Government of India Official Website: The official website of the Indian government (https://www.india.gov.in/) offers comprehensive information on government policies, budgets, and initiatives, including Union Budget documents.
World Bank Doing Business Report: The World Bank publishes an annual “Doing Business” report, which includes rankings and data related to the ease of doing business in various countries, including India. You can find this report on the World Bank’s official website (https://www.doingbusiness.org/en/reports/global-report).