India is moving towards a fast track regime for FDI approvals. The Government has initiated the process for creating standard operating procedures in this regard. FDI, being a critical factor, has contributed to improving India’s balance of payment. The growing importance of India can be gauged from the proposal to make New Delhi a hub for Asian Development Bank. India has reached out to the World Bank identify some factual errors in the assessment for the Ease of Doing Business Rankings.
New Delhi proposed to be a hub for Asian Development Bank – The Asian Development Bank (ADB) is developing New Delhi as a regional hub for its operations in South Asia to speed up decision-making and reduce time lag in implementing projects in the region. India’s finance minister Arun Jaitley in his speech at the ADB’s 50th annual meeting in Yokohama last month had proposed the same. ADB president Takehiko Nakao during the closing press conference said the Bank is trying to now make several places like Delhi for South Asia and Kazakhstan for Central Asia a hub for the region. “We have already started out-posting staff for private sector operations and also for procurement. We have already started working on the idea of a hub, but we have not announced this is a hub, but we are out-posting more people,” Nakao said.
FDI Helps in Improving India’s BoP – Strong foreign direct investment (FDI) and portfolio flows helped put the overall balance of payments in a higher surplus. It was due to this factor that India’s external sector balance sheet remained in the comfort zone during the quarter ended March 2017 despite a higher merchandise import bill and almost flat growth in services income as both software services income and remittances by overseas Indians were at the same level as that of the previous year.
Fast-tracking FDI proposals – The government is looking to clear FDI proposals in the 11 sectors, such as defence, insurance and telecom, where approval is still required within eight to 10 weeks of receipt of application to boost the investment climate after the abolition of the Foreign Investment Promotion Board (FIPB). The standard operating procedure for clearances that was discussed with ministries on Tuesday has proposed a maximum 10 weeks for cases where security clearances are required, amid indications that the limit may be increased given the sensitivities involved. “We are currently discussing the plan and no decision has been taken. We hope to move to the new mechanism from July 1,“ department of industrial policy and promotion (DIPP) secretary Ramesh Abhishek said
As per the draft SOP, the existing FIPB portal will be revamped for online filing of foreign investment proposals. The portal will be named as Foreign Investment Facilitation Portal (FIFP). The DIPP would then transfer the proposal online to a ministry or department concerned within two days of filing. Time limits have been fixed for every stage of clearance. FDI proposals which do not require security approval would be cleared in eight weeks, while those needing clearance would be approved in 10 weeks. Additional two weeks time would be given to the DIPP for applications that are proposed for rejection. Proposals which require security clearances from the Home Ministry include investments in telecommunication, satellites, broadcasting and security agencies.
Errors in World Bank Assessment – India has recently communicated to the World Bank of certain errors in the manner of assessment carried out by the World Bank in the Ease of Doing Business Ranking in 2016 where it was ranked a lowly 172 among 190 on enforcing contracts. The Department of Industrial Policy and Promotion (DIPP) has highlighted the changes to the legal framework regarding enforcement of contracts not taken into consideration in the report. The communication is part of the assessment process, but India decided to break away from the practice of yes-and-no answers to explain its viewpoint.
The government wants the World Bank to correct its findings related to arbitration and settlement of commercial disputes in the country following substantial changes to the framework for such redress. India is keen to emerge as a low-cost arbitration hub for businesses. The government also wants corrections on items such as attorney fees, which range between 8 per cent and 10 per cent of the claim value instead of the 30.6 per cent estimated in last year’s study.
GST to be implemented in July – The Government is all set to implement the Goods and Services Tax regime from July 1, 2017. This will be one of the largest changes to a tax regime ever undertaken. However, currently there is plenty of confusion prevailing among the general public on the manner in which the changes will take place. The enormity of the exercise has been the cause of endless debates in the run up to the changeover. It is hoped that the new regime will stabilize in the long run and bring in the targeted benefits.