The discussion around entry of foreign law firms in India was resurrected recently. The economic slowdown is now even more glaring with ADB and IMF further lowering their respective April 2019 growth forecasts, which, together with the forecasts reported by World Bank and Fitch last month, is now a cause for concern.
The Government has taken a step towards reducing multiple labour law compliances. Finally, something to cheer about, as India moved up its ranking in the Global Innovation Index. This is perhaps a testimony to India’s space program with the successful launch of Chandrayaan-2 spacecraft on July 22, 2019, India’s second mission to the moon.
Entry of Foreign Law Firms: The Society of Indian Law Firms (SILF) has recommended to the government that foreign law firms be allowed into India in four phases, marking a reversal in position that could lead to the bar being lifted. However, the group is still opposed to the Big Four — Deloitte, PwC, EY and KPMG — offering legal services. The entry of overseas law firms has long been staunchly opposed by their domestic counterparts, led by SILF. If the government agrees, the Advocates Act will need to be amended.
The government may get the ministries of commerce and law to work on a regulatory structure to allow multinational law firms in. SILF recently submitted to the government a detailed plan on the matter. This includes allowing Indian firms to promote their services.
ADB Reduces Growth Forecast: The Asian Development Bank (ADB) recently released its Asian Development Outlook 2019 Supplement which supplements the Asian Development Outlook 2019 (ADO 2019) projections published in April 2019 (as reported by Asia Law Portal). India is expected to grow by 7.0% in 2019 and 7.2% in 2020, slightly slower than projected in April because the fiscal 2018 outturn fell short.
The GDP growth forecast for FY2019 was revised down from the ADO 2019 forecast of 7.2% to 7.0%, mainly reflecting the unexpectedly weak FY2018 outturn. Growth is expected to inch up again to 7.2% in FY2020, helped by recent reforms to improve the business climate, strengthen banks, and relieve agrarian distress.
The slowdown was broad-based, with private consumption and investment growth slowing from previous quarters. On the supply side, agriculture and manufacturing grew more slowly as services picked up a bit. Annual GDP growth in FY2018 decelerated as a result, from 7.2% in FY2017 to 6.8%.
IMF Reduces Growth Forecast: The International Monetary Fund (IMF) has once again provided a lower forecast for India’s economic growth. In its recently published World Economic Outlook, July 2019 it mentioned that India’s economy is set to grow at 7.0 percent in 2019, picking up to 7.2 percent in 2020.
The downward revision of 0.3 percentage point for both years reflects a weaker-than-expected outlook for domestic demand. IMF had earlier in April lowered the economic growth forecast from 7.5% (in January 2019) to 7.3% for 2019 (as reported by Asia Law Portal).
Consolidation of Labour Laws: Companies will soon not require multiple registrations, as they do now under a plethora of labour laws, because the government has proposed one licence, one registration, and one return for establishments. This is part of a major labour law reform proposed in Parliament recently. Single registration will be coupled with single licence, along with a single return, for executing projects for five years. The Government has introduced two labour codes — the Code on Wages and the Code on Occupational Safety, Health and Working Conditions (OSH) — in the Lok Sabha. The Bills, if passed, are expected to benefit about 50-crore workers.
The Wages Code, once enacted, will subsume the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976. The OSH Code will subsume 13 laws relating to factories, mines, dock workers, building workers, plantations labour, contract labour, inter-State migrant workmen, working journalists and motor transport workers, among others.
It enhances the ambit of the provision of safety, health, welfare and working conditions from the existing nine major sectors to all establishments having 10 or more employees. This is part of the overall reform initiative wherein the government wants to concise 44 labour laws into four broad codes on wages, social security, industrial safety and welfare, and industrial relations
India moves up in Global Innovation Index: The 2019 edition of the Global Innovation Index was recently released in New Delhi. For the first time, the GII launch was hosted by the Government of India. At the launch, WIPO Director General, Francis Gurry stated that India’s high-level focus on using innovation to foster economic development makes the country an ideal location for the GII 2019 launch.
The report mentioned India (ranked 52nd) getting closer to the top 50 as a notable move in the GII rankings, up 5 places from its 2018 rank of 57. It further mentioned that the performance improvement of India is particularly noteworthy. India continues to be the most innovative economy in Central & Southern Asia—a distinction held since 2011 —improving its global rank to 52nd in 2019.
India is consistently among the top in the world in innovation drivers such as ICT services exports, graduates in science & engineering, the quality of universities, gross capital formation—a measure of economy-wide investments—and Creative goods exports. India also stands out in the GII ranking of the world’s top science and technology clusters, with Bengaluru, Mumbai, and New Delhi featuring prominently among the global top 100 clusters. Given its size—and if progress is upheld—India will make a true impact on global innovation in the years to come.