Journal Press India^®

I was delighted to read the news that India received capital inflows to the tune of $31 billion during January- June 2015, while China attracted an investment of $28  billion and the USA  stood at third position with $27 billion, according to a report by The  Financial Times. Last year i.e., 2014, India stood at the fifth position in the list of top FDI destinations.  (http://www.ibtimes.co.in/india-surpasses-china-us-emerge-top-fdi-destination- report-648588)

“A ranking of the top  destinations for green field  investment (measured by estimated capital expenditure) in the first half of 2015 shows India at number one,  having attracted roughly $3 billion more than China and $4 billion more than the US,” NDTV Profit quoted, the FT report, as saying. (http://profit.ndtv.com/news/economy/ a r t i c l e - i n d i a - p i p s - c h i n a - u s - t o - e m e r g e - a s - f a v o u r i t e - f o r e i g n - i n v e s t m e n t - d e s t i n a t i o n - r e p o r t -

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Finance Minister Arun Jaitley was “quick” to relate the increase in foreign capital inflows to measures taken by the Modi government. “Satisfying, our efforts are paying off. India becomes the Highest FDI destination for Greenfield projects,” he said on twitter on September 29, 2015. The government has relaxed FDI norms in many sectors, including multi-brand retail, telecom and defence. Swifter approvals for businesses have been put in place and Mr Jaitley has repeatedly promised “fair and predictable” tax regime. (http://www.ibtimes.co.in/ india-surpasses-china-us-emerge-top-fdi-destination-report-648588; September 30, 2015 11:19 IST)

After coming into power in May 2014, the National Democratic Alliance (NDA) Government has taken various measures to bring in more foreign investment and boost its manufacturing activity through its ‘Make in India’ initiative.

Some of the steps taken by the government include doing away with minimum paid-up capital for companies, facilitating the incorporation of companies with one form, and cutting down the documentation work for exports and imports. From 1st May, the Ministry of Corporate Affairs started providing one  integrated company incorporation form in place of eight forms required earlier, making compliance and reporting procedures easier for businesses.

“In a year when many major FDI destinations posted declines, India experienced one of 2014’s  best FDI growth rates, increasing its number of projects by 47 per cent,” the newspaper report said.

Prime Minister Narendra Modi  has set a target to push the country to the top 50 list in World Bank’s “Ease of Doing Business” index in three years. In its last report, the World Bank had ranked India at the 142nd position.

Modi has travelled to several countries since he took  over as Prime Minister in May  2014, laying out a red carpet for foreign investors with a commitment to remove red tapism. The  one-year-old ‘Make in India’ initiative that aims to turn the country into a global manufacturing hub has been widely publicized. The  recent visit to USA and meetings with CEOs of leading companies like  Apple, Facebook, Google, Microsoft, etc., who have committed their support to make in India initiative is a landmark in the journey of making India a manufacturing hub.

Modi  met 47 chief  executives of Fortune 500  companies at a dinner moderated by Fortune editor Alan Murray in  New  York. Media tycoon Rupert Murdoch tweeted after the meeting that he  had a “great hour” with the Indian prime minister.

“Best leader with best policies since independence, but massive task to achieve in  most complex nation”, the tweet read.

India’s ambassador to the US, Arun K.  Singh told a media conference later that chief executives had been “upbeat” after the interaction and said: “They felt that the initiatives being taken by the government were inaccurately assessed and reported, and appreciated the trend and direction in India.”

India’s Foreign Ministry Spokesman Vikas Swarup added that “Everyone was happy with the changes in India. Their only demand was that the changes be faster”.

Apple uses manufacturing facilities of Foxconn, which has recently promised to invest $5 billion in manufacturing facility in Maharashtra. (http://www.bbc.com/news/world-asia-india-34355815)

Following are the top five announcements from the Digital India dinner:

1.  Sundar Pichai-led Google will help bring wireless Internet or WiFi to 500 railway stations across the country “in a short time,” PM Modi said.

2.  Microsoft’s Satya Nadella shared the company’s plan to help the government take low cost broadband to five lakh villages.

3.  Microsoft will also announce next week the availability of its cloud services operating out of Indian data centers. “We believe low cost broadband connectivity coupled with the scale of cloud computing and the intelligence that can  be  harnessed from data can  help drive creativity, efficiency and productivity across governments and businesses of all  size. This in turn will create global opportunities for India,” Mr Nadella said.

4.  Qualcomm has promised a 10 billion rupee fund for startups in India. “We share Prime Minister Narendra Modi’s vision to  transform India into a digitally empowered society and knowledge economy,” Qualcomm executive chairman Paul E Jacobs said.

5.  Qualcomm also announced that it will  set up  a number of ‘design houses’ for product innovation in  India. (http://www.ndtv.com/cheat-sheet/pm-modis-silicon-valley-dinner-top-5-announcements-1223443 September 27,  2015 12:30 IST)

It is quite evident from the above that the rest of the world has started believing in the development agenda of India, however, there are still challenges before the Government of India like  Goods and Services Tax (GST) bill has been passed by Lok  Sabha but is still pending in  Rajya Sabha.

The  Constitution (122nd Amendment) Bill,  2014 was introduced in  Lok  Sabha on December 19, 2014. It was passed in  that House on May  6, 2015.

It was referred to a Select Committee of Rajya Sabha on May  14, 2015. The  Committee is scheduled to submit its report by the end of the first week of the Monsoon session.

The  Committee considered and adopted the report in its meeting held on the 20th   July, 2015.

The  Select Committee constituted to  examine the Constitution (122nd Amendment) Bill,  2014 submitted its report to Rajya Sabha on July 22, 2015.  (119  pages)

In order to address concerns of the manufacturing states, the GST  Constitution Amendment Bill  has provided for an additional one  percent tax for a period of two  years.

Government needs to reconsider levy  of 1 percent additional tax by states over and above GST  rate as it could make intra-state movement of goods  expensive and hurt the ‘Make in India’ campaign, Chief Economic Advisor Arvind Subramanian said on Tuesday. “Think of a good going from Gujarat to Tamil Nadu, crossing four states. The  good would embody an additional tax of about 4-5 percent, because it is 1 percent every state. That might make it easier to import into Tamil Nadu from Bangkok,” Subramanian  told reporters here. (http:// www.moneycontrol.com/news/economy/1-tax-by-states-overabove-gst-to-hurt-makeindia_1392345.html?utm_ source=ref_article)

On the other hand, The  Companies Act 2013 has been amended recently to ensure ease of doing business. The CA Amendment 2015 is a welcome step, however, it could have delivered far  more. While relaxations in  the regime governing related party transactions,  limited access to  strategic corporate resolutions, eliminating some procedural requirements (such as minimum paid-up requirement, use of common seal, etc.)  will  surely ease some of the procedural compliances, however, at the same time several concerns under CA 2013 are yet to be  addressed by  the GOI  (such as easing the private placement process for  closely held companies, specific exemption on insider trading provisions for  private companies, stock options to  promoters in  case of private companies, etc.). Towards this, the GOI  has constituted the Companies Law Committee to  identify and recommend the GOI on issues relating to implementation of CA 2013 and to also examine the recommendations from the various other stakeholders and regulatory agencies. (http://www.mondaq.com/india/x/410320/ Corporate+Commercial+Law/Companies+ Amendment+Act+2015+Key+Highlights)

Hence, there are lot of measures which are required to be taken at various levels but it can  be concluded that India is moving in the right direction and the world has started acknowledging the same. Increased flow of FDI is  a testimony towards this and once  the capital starts flowing, economic development follows. We  need to create congenial atmosphere with ease of entry and exit for  companies. Even programs like  ‘Swatch Bharat Abhiyan’ (Clean India Movement) will  also create better ambience to attract investment. Unless each Indian citizen join  the movements like  clean India, transformation of India will  not happen. Let us all join  hands with full  commitment to make India and this world a better place to live.

I am sure that you will find this issue of DBR interesting and worthwhile to read. I invite you all to XVII Annual International Seminar from January 3 to 4, 2016 at India Habitat Centre, Lodhi Road, New  Delhi, on the main theme, “Make in India” and deliberate upon making India a manufacturing hub.

Rtn. Dr. Ajay Kr. Singh