Industry has reason to be pleased with the direction and pace of reform initiatives taken by the Narendra Modi government in its first 100 days. The commitment to revive economic growth, rejuvenate investor confidence and bring consumer demand back on track has been articulated effectively from day one. The overarching theme has been a strong market-friendly and investor-friendly tone, and the need for all sections of society to contribute to development.
The most encouraging characteristic of the new government has been its proactive solutions to speed up administrative procedures and decision-making processes. CII had flagged India’s low ranking in the World Bank’s Doing Business indicators at 134 out of 189 countries, and had set up a task-force to identify bottlenecks in specific areas. Many of these are being addressed by the government, as can be seen in the effort to introduce e-Biz in ministries and departments within this year. Improved processes by collapsing ministries and cutting down on the number of points of approval are also helping to fast-track projects and clearances.
The finance minister’s commitment to a stable and predictable tax architecture was directed at reassuring investors that their concerns are high on the government’s radar. A committee has been set up to resolve disputed tax demands and areas such as advance ruling, transfer-pricing and GAAR were taken up in the Budget. The pass-through status for Infrastructure Investment Trusts would help channelise more funds into infrastructure.
Investment from overseas was also a priority as FDI limits in defence and insurance were relaxed to 49%. E-commerce and railways have been opened up, while FDI in smart cities will be encouraged by relaxation in built-up area and investment. The PM’s strong emphasis on boosting manufacturing, evident from his Independence Day speech and earlier, is welcome. The sector’s contribution to GDP, jobs and exports is far below its potential and, as can be seen from the Q1 data, its revival can boost growth. Manufacturing will be the primary source of jobs for the large cohort entering the workforce each year. The government has rectified some tax anomalies and continued the excise cut stimulus for a further period. Additionally, industrial parks and corridors are expected to make rapid progress which will encourage manufacturing, particularly in critical sectors such as electronics and capital goods. The Budget encouraged entrepreneurship by promising to redefine the MSME sector and reducing the investment limit for tax benefits to R25