The US government exhorts the Indian government to come up with initiatives to ease hurdles
New Delhi, NFAPost: According to the US State Department report ‘2021 Invetment Climate Statements: India’ highlighted the fact that India remains a challenging place to do business. The US State Department also urged the government to come up with an attractive and reliable investment climate.
It is interesting to note that the Modi-led government is trying to come up with pro-investment policy initiatives to bring more FDI to Inida for the country’s development and job creation activities. The government is also going ahead with its disinvestment plans.
The US authorities highlighted the fact Indian government should reduce barriers to investment and minimising the bureaucratic hurdles. As part of the report, the department also highlighted the fact like the removal of the special constitutional status from the state of Jammu and Kashmir (J&K) and the passage of the Citizenship Amendment Act (CAA).
Besides increased tariffs, procurement rules that limit competitive choices, sanitary and phytosanitary measures not based on science, the report voiced concerns on the government’s protectionist measures like Indian-specific standards which are not aligned with international standards. These resulted in producers from global supply chains setting up manufacturing centres and restricted the expansion in bilateral trade.
In its report, the State Department said that the National Democratic Alliance (NDA) government’s first 100 days of its second term were marked by two “controversial” decisions. The removal of special constitutional status from J&K and the passage of the CAA, it said.
The State Department report said that protests followed the enactment of the CAA but ended with the onset of COVID-19 in March 2020 and the imposition of a strict national lockdown. The management of Covid-19 became the dominant issue in 2020, including the drop in economic activity and by December 2020, economic activity started to show signs of positive growth.
The State Department said that in response to the economic challenges created by the COVID-19 pandemic and the resulting national lockdown, India enacted extensive social welfare and economic stimulus programmes and increased spending on infrastructure and public health.
The government also adopted production linked incentives to promote manufacturing in pharmaceuticals, automobiles, textiles, electronics and other sectors. These measures helped India recover from an approximately eight per cent fall in GDP between April 2020 and March 2021, with positive growth returning by January 2021, it said.
Noting that the Indian government continued to actively court foreign investment, the report said that in the wake of Covid-19, India enacted ambitious structural economic reforms, including new labour codes and landmark agricultural sector reforms, that should help attract private and foreign direct investment.
In February 2021, Finance Minister Nirmala Sitharaman announced plans to raise $2.4 billion through an ambitious privatisation programme that would dramatically reduce the government’s role in the economy.
In March 2021, Parliament further liberalised India’s insurance sector, increasing the Foreign Direct Investment (FDI) limits to 74% from 49%, though still requiring a majority of the Board of Directors and management personnel to be Indian nationals, the report said.