Corporate America ready to invest billions of dollars in India
Last Updated: Wednesday, July 9, 2014, 12:35
Washington: Anticipating major economic reforms in the maiden budget to be presented by the new Indian government, Corporate America has said it is ready to invest billions of dollars in India but the budget must match "pragmatism with unbridled enthusiasm".
Through this budget, the Obama Administration, policy makers, corporate sector and economists in the US are hoping to see a strong sign of a the major economic reforms which were promised by Prime Minister Narendra Modi during his election campaign.
At the same time, they are also expecting some tough unpopular measures to be announced, which India watchers in the US believe are necessary to bring the economy back on track and revive the annual growth rate of more than eight percent.
Corporate America is hoping that Finance Minister Arun Jaitley, who will present the budget tomorrow, would bring in an era of clarity, predictability and transparency in the system that would help in creating an investment-friendly environment.
US India Business Council (USIBC) sees this budget as an extremely important opportunity for India's administration to begin to meet the high expectations of both Indian and international industry, said USIBC acting president Diane Farrell.
"The global community is ready, with billions of dollars in long-term capital, to increase investment in India," Farrell said.
"Critical policy reforms, including reversing the harmful retrospective tax amendment and passing insurance FDI liberalisation with full voting rights to 49 percent, will help boost the economy and get the investment climate back on track," Farrell said.
Ron Somers of the India First Group said, "The world will be watching Prime Minister Modi's first budget. To attract a herd of investors rushing to India, this budget, more than others in the past, must match pragmatism with unbridled enthusiasm. This is India's moment."
"In a word, boldness is the need of the hour. The earlier government had shied away from using India's budget to announce 'big bang' reforms, but just such a shock is needed more than ever," Somers said.
Precisely because the world economy is still struggling to recover with dangerous bubbles appearing everywhere that are bound to pop, which is keeping money on the sidelines, India's new budget must be bold and robust and send a clarion signal of dynamic, second-phase reforms, he said.
"Top of the list would be to lift investment caps in insurance and defense in the next Parliamentary session. Clarity on tax policy, adopting all or most of Dr Shome's recommendations, bringing certainty to the fact that taxes will be prospective and not retroactive, will be welcome news," Somers said.
Richard M Rossow, Wadhwani Chair in US India Policy Studies at the Center for Strategic and International Studies, noted that the impact of the actual budget itself is perhaps a bit oversold these days as compared to a decade ago when customs duties were high and there were major differences in the tax treatment of different industries and products.
"Now that rates are down and tax treatment is more common across industries, the budget's impact on the economy is less important than the other changes that take place throughout the year, reducing the timeline for projects to break ground, lifting FDI caps, sector regulation, etc. The Budget Speech, of course, is expected to highlight many of these reforms the government intends to adopt," Rossow said.
Noting that market sentiments and business mood are positive under the central government led by Prime Minister Modi, President of USA-India Chamber of Commerce Karun Rishi said this is the time to take tough decisions to jumpstart the economic growth and curb inflation.
"There is no magic bullet. Some key growth oriented budget announcements on taxation, FDI, disinvestment, infrastructure and controlling deficit can help shape the fiscal policy direction. Investors like clarity and transparency. The Finance Minister must come out with pragmatic measures to give boost to the economic growth instead of announcing populist measures," Rishi said.
"Substantial allocations should be made towards health. Healthy citizens are the backbone of an economic power. 2014 budget must increase outlay on medical research & development, biotechnology, access to innovative medicines, education and hygiene. Budget must send clear message to boost pharma R&D and make India an innovation hub with global partnerships," he said.
Indian-American community leader Ashok Mago, urged the Modi Government to provide opportunities for 20 million NRI's to invest by simplifying rules and use their talent.
"Impose property tax for better education. Provide tax incentives for innovation and growth of small businesses. Privatise as many services as possible, start with Air India. Tax incentives for job training programmes. Reduce the deficit," Mago said.
"Lower income tax rates with very harsh penalties for tax evaders. Encourage direct foreign investments in all sectors of the economy," he said.
Tough reforms are needed to overcome the challenges facing the Indian economy and to revive the critical Indian manufacturing sector, said Russell Green, the Will Clayton Fellow in International Economics at Rice University's Baker Institute for Public Policy and an adjunct assistant professor of economics at Rice.
Green said the new government must target four interrelated reforms to remove uncertainty: improve the business climate, improve infrastructure, reduce onerous labour regulations and carry out substantial institutional reforms in the government.
"Identifying important reforms is a relatively easy job in India. The challenge is in implementation," Green said.
First Published: Wednesday, July 9, 2014, 12:35