India should rely much more on markets for efficient resource allocation, rather than government interventions, Mark Vorsatz, global chairman and CEO of global tax consultancy firm Andersen, said on Thursday.
The country should pro-actively try to attract more foreign direct investment (FDI) into the country, by providing both a level-playing field to investors and a conducive regulatory climate, he told FE in an interview.
Higher FDIs would not only scale up capital formation and fixed asset creation in the economy, but would also help to put to good use India’s abundant labour and boost government revenues, he said. “I don’t think there is yet a level playing field for foreign investors in India,” he said.
“India is a major economy with a significant opportunity to expand at a high rate. While there are indeed many economic, health and geopolitical challenges, which may not go away completely in the near term, I think that an emphasis on free trade and balanced opportunities in markets are the best ways to address these issues,” Vorsatz said. According to him, such policies could help reduce inflation and stimulate business opportunities and jobs growth.
India has, in recent years, taken several steps to make the tax rates benign and increase certainty and predictability of tax policies. The tax system has been made more system-driven, less obtrusive, facilitating faceless interactions between the taxpayer and the taxman. Vorsatz, however, said, “While in some circumstances, taxes are a factor in a company’s decisions regarding location of plants, business expansion etc, more often such decisions are driven by regulatory considerations.”
A “user-friendly” environment would facilitate more investments and a level playing field would encourage companies to expand into India, he said.
“I think it is important that the tax and regulatory environment facilitates the expansion of multinationals in the Indian market, such that, there will be the necessary foreign investment to enable the country to achieve its full potential,” he said.
While the government is revamping the policies on special economic zones and bringing in a new law that will facilitate formation of large hubs of enterprises but with no particular export focus, Vorsatz said, adding these tax-free enclaves can be effective in stimulating business investments. “The broader policies of the government to provide a platform that will encourage investments is at least as important.”
Andersen, with a headcount of over 12,000, has 1,814 partners and presence in 173 countries. Nangia Andersen is a member firm in India.