FM Arun Jaitley needs to lay a strong foundation in Budget 2016 to ensure supporting business-friendly policies and taxation framework.
Creating the buzz about improving the business environment to capitalise on India’s fastest growing status globally is a good idea. But, for any substantial gain, Finance Minister Arun Jaitley needs to lay a strong foundation in the Budget 2016 to ensure supporting business-friendly policies and taxation framework.
A strong sense of urgency is now clearly visible in the NDA government’s efforts to drive private investment to boost growth.
With one-third of his current five-year tenure already passing, Prime Minister Narendra Modi has decided to meet his council of ministers once every month to take stock of the impact of government policies on the ground, economic affairs secretary Shaktikanta Das has tweeted that the Finance Ministry is organising a two-day India Investment Summit beginning February 4 in New Delhi, to attract foreign investors to invest in various infrastructure projects, and the Department of Industrial Policy and Promotion (DIPP) is working on a national investment grid to promote private investment in different states.
To the government’s advantage, foreign direct investment (FDI) has grown an impressive 16.6% in the first nine months of 2015 at $42.7 billion and this means FY16 could be the year of the highest FDI flows into India.
This, clearly, needs to be accelerated along with the efforts to boost investments by the domestic companies which is severely stressed at present.
The encouraging part here is that the states have started competing with each-other now in offering business-friendly environment and policies.
Even a West Bengal, known more for its anti-industry environment, is trying to attract investors in a big way.
Chief Minister Mamata Banerjee earlier this month urged the industrialists attending the Bengal Global Business Summit in Kolkata to invest in the state as, “The state is ahead on every count, especially development parameters…. There is big scope and hope in Bengal. There is cheap labour, sufficient power, skilled manpower. We have a land bank, suitable policies…”, and promised that the state government would ‘work as their employee’.
Whether it is the newly created Andhra Pradesh (after division), or Rajasthan, Haryana, Madhya Pradesh, Tamil Nadu, or even Uttar Pradesh and Bihar, there is increasing competition now among states to improve ease of doing business to attract private investment.
So, the DIPP initiative of creating a National Investment Grid to map business opportunities in different states so that the private sector could be encouraged to invest, is a good idea, provided the states are made an equal partner in this.
The interesting aspect here is that the grid will not only be having the details of the upcoming projects along with the existing ones, but will also list the land available with the central government and public sector undertaking, and also states.
But, for this new buzz on pushing investments to have any substantial impact in driving private investment, the upcoming Budget 2016 will have to spell out a roadmap to usher in business-friendly policies and taxation system.
Thanks to the highly stressed corporate balance sheets, the government’s mid-year review points out that the capital expenditure of the corporate as a share of GDP has declined further from 5.4% in FY14 to 5.2% in FY15.
While there is a need to promote market-linked pricing in different segments like oil and gas and agriculture, FM Arun Jaitley has to balance the needs of the industry in doing away with exemptions and his proposed cut in corporate tax rate from 30% to 25% in the Budget.
PM Modi has already announced that retrospective taxation was a thing of the past and the Finance Ministry has to show how the government will ensure that.
All eyes would be on FM Arun Jaitley on February 29, and this probably is his best chance to silence his critics.