Presentation on theme: "Ease of Doing Business with India"— Presentation transcript:
1 Ease of Doing Business with India Afaq HussainBureau of Research on Industry and Economic Fundamentals (BRIEF)New Delhi, India
2 Ease of Doing Business – What does it measure? Complexity and Cost of Regulatory ProcessesStarting a BusinessProcedures, time, cost and paid-in minimum capital to start a limited liability companyDealing with Construction PermitsProcedures, time and cost to complete all formalities to build a warehouseGetting ElectricityProcedures, time and cost to get connected to the electrical gridRegistering PropertyProcedures, time and cost to transfer a propertyPaying TaxesPayments, time and total tax rate for a firm to comply with all tax regulationsTrading Across BordersDocuments, time and cost to export and import by seaportStrength of legal institutionsGetting CreditMovable collateral laws and credit information systemsProtecting Minority InvestorsMinority shareholders’ rights in related-party transactions and in corporate governanceEnforcing ContractsProcedures, time and cost to resolve a commercial disputeResolving InsolvencyTime, cost, outcome and recovery rate for a commercial insolvency and the strength of the insolvency legal frameworkLabor Market RegulationFlexibility in employment regulation, benefits for workers and labor dispute resolutionProtecting Minority Investors: India strengthened minority investor protections by requiring greater disclosure of conflicts of interest by board members, increasing the remedies available in case of prejudicial related-party transactions and introducing additional safeguards for shareholders of privately held companies. This reform applies to both Delhi and Mumbai.
3 Ease of Doing Business – India Report Card 201313120141402015142Ease of Doing Business –India Report CardOverall RankingIndicatorsRank 2015Rank 2014ChangeStarting a Business158156-2Dealing with Construction Permits184183-1Getting Electricity137134-3Registering Property121115-6Getting Credit3630Protecting Minority Investors72114Paying Taxes154Trading Across Borders126122-4Enforcing Contracts186No changeResolving Insolvency135Protecting Minority Investors: India strengthened minority investor protections by requiring greater disclosure of conflicts of interest by board members, increasing the remedies available in case of prejudicial related-party transactions and introducing additional safeguards for shareholders of privately held companies. This reform applies to both Delhi and Mumbai. Source: The World Bank – Ease of Doing Business
4 Best Global Performance Where does India stand?How easy is to?IndiaChinaBrazilRussiaSouth AfricaSouth Asia – Reg Avg.Best Global PerformanceOverall Rank142901206243-SingaporeStart a Business158128167346195New ZealandDeal with Construction Permits18417917415632118Hong KongGet Electricity13712419143122KoreaRegister Property121371381297127GeorgiaGet Credit36718952Protect Minority Investors7132351001778Pay Taxes17749UAETrade Across Borders12698123155Enforce Contracts1861446148Resolve Insolvency53556539125FinlandSource: The World Bank – Ease of Doing Business
5 FDI inflow to India Main Investing Countries (2013, %) Mauritius37Singapore11United Kingdom10Japan7USA6The Netherlands5Main Invested Sectors (2013, %)Service Sector19ConstructionDrugs and PharmaceuticalsIT and SoftwareTelecommunicationsSource: UNCTAD, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
6 Dealing with Construction Permits What are the challenges?Starting a BusinessThe cost of starting a business in India is astronomical, and the procedures involved can be daunting without local knowledge.There are 12 procedures to complete in the initial set up of a business costing 49.8% of income per capita.It takes almost a month (27 days) to complete the tasks on average, which is well above the OECD average of 12 days.Dealing with Construction PermitsConstruction permits are also a costly pursuit, involving 34 procedures and taking 196 days.Obtaining Intimation of Disapproval from the Building Proposal Office and paying fees takes around a month, and NOCs must be sought from the Tree Authority, the Storm Water and Drain Department, the Sewerage Department, the Electric Department, the Environmental Department, the Traffic & Coordination Department and the CFO.Getting ElectricityThe cost of getting electricity is relatively cheap in comparison to the rest of South Asia, but the number of procedures involved can be rather daunting.What’s more, each procedure is in itself quite time constraining, taking around eight days to receive an external site inspection and three weeks to get externally connected, have a meter installed and conduct a test installation
7 Enforcing Contracts and Resolving Insolvency … Challenges for InvestorsRegistering PropertyRegistering a property requires quite a bit of legwork and can also incur substantial charges.Stamp duty of 5% of the property and a 1% charge on the market value of the property incurred at the Sub-Registrar of Assurances are the two fees to look out for, although the lawyer charges and fees at the Land & Survey Office can also pinch.TaxationBusinesses operating in India are required to make 33 tax payments a year, taking 243 hours’ worth of attention.The headline corporation tax rate stands at 30%, but companies can also incur charges in the form of a central sales tax, dividend tax, property tax, fuel tax, vehicle tax, VAT and excise duty.Enforcing Contracts and Resolving InsolvencyIndia ranks as one of the worst countries in the world for the ability to enforce a contract, taking an average of 1,420 days.It takes 4.3 years to resolve insolvency in India, far longer than the South Asian and OECD average
8 Stories of Clashes and Bargains The British telecom giant embroiled in a tax dispute in India because of a retrospective taxation1 rule brought by the previous government.The dispute between Vodafone Plc and the Indian government - led to negative perception about ease of doing business in the country.Vodafone called the government to rationalize taxation across industries, including the heavily taxed telecommunications sector.And others.. Called for a corrective action to make India a ‘Must Invest’ destination1 Old proceedings being taxed as per the new rules
10 REPOSITORY OF RESOURCES 1.2 BILLION PEOPLE FAST GROWING ECONOMY COMPREHENSIVE BANKING NETWORKEVER GROWING CONSUMER BASEYOUNGEST POPULATION BASE IN THE WORLDBIGGEST POOL OF SKILLED AND CHEAP LABOURDESTINATION OF LARGE FDI & MULTINATIONALSSTRATEGIC LOCATION FOR INTERNATIONAL BUSINESSIndia – natural resources - coal (fourth-largest reserves in the world), iron ore, manganese, mica, bauxite, rare earth elements, titanium ore, chromite, natural gas, diamonds, petroleum, limestone, arable landEconomy - India averaged 5.83 percent from 1951 until 2014, reaching an all time high of percent in the first quarter of 2010With 356 million year-olds, India has the world’s largest youth population despite having a smaller population than China
11 India Modi-fied: Fixing the Flight Starting a BusinessAmendment to provisions of the Companies Act to add to the ease of doing business in India - provision to ensure that frauds beyond a certain threshold need to be mandatorily reported by the auditors to the government, relax a number of norms including those pertaining to related party transactionsAmendment to Electricity Act: Choice to buy power from companies of choiceLand AcquisitionAmendment to Land Acquisition billThe new law facilitates development but balances it with higher compensation, relief and rehabilitation measures for the farmers. Compensation and RNR package has been made entirely applicable to the thirteen exempted lawsExempting areas of industrial corridors, social infrastructure, rural infrastructure, housing and defense, from several provisions of current lawNo need for consent of 80% of landowners during acquisitionIncreased likelihood that landowners will be compensated in projects, such as highways and rail
12 India Modi-fied: Fixing the Flight Taxation PolicyRationalizing tax management to end the image of India having an ultra-aggressive tax policy.Resolving of pending disputes through appropriate mechanisms so that tax structures do not become a disincentive against investments.Giving major tax rebates to the manufacturing sectors which are facing a slowdown.Labor LawsBill to amend the Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by certain Establishments) Act, 1988The Bill exempts establishments employing up to 40 workers from filing returns and maintaining registers. Currently the ceiling is 19 workers.
13 And the Course Correction continues… Outlining the vision of cooperative federalism through the creation of successor to the Planning CommissionBuilding a national consensus and introducing a bill to amend the constitution to implement the Goods and Services Tax (GST)Opening the gates of investment by raising FDI limits in the insurance, defense and the railways. The FDI conditions in real estate have been liberalizedGiving major boost to tourism by introduction of e-visaDeregulation of diesel prices and facilitating the opening up of petrol and diesel sector to private investmentLaunching flagship programs such as Make in India, Digital India and Skilled India so that the real image and potential of India is exploredTrade facilitation by allowing 24 X 7 custom clearance on 17 airports and 18 seaportsBanking sectors reforms such as recapitalization of banks, professionalizing managements, bringing Government equity to 52 percent, and allowing greater autonomy to banks and financial institutions
14 Courier Services, Test Marketing Navigating FDI Caps and RestrictionsSectorPrevious Policy2014 Revised PolicyInvestment CapApproval RouteCommodity Exchanges49% ( FDI + FII )FDI Cap: 26%FII Cap: 23%Government49% FDI Cap: 26% FII Cap: 23%AutomaticInsurance26% ( FDI )RailwaysN/A100%Defense Production49%Above 49%Automatic GovernmentTelecom ServicesUp to 49%Above 49% and up to 74%Above 49% and up to 100%Courier Services, Test Marketing2013’s FDI amendments are now being further augmented under the new Narendra Modi administration, with several sectors significantly increasing the amount of foreign investment permitted. Of particular interest are the hikes that will be seen in the insurance and railway sectors; the former rising from 26% to 49%, and the later from 0% to a massive 100%.
15 Doing Business just got easier: 2014 has been the year of reforms Validity of Industrial license extended to three yearsProcess of obtaining environmental clearances made onlineAll returns should be filed on-line through a unified formServices of Central Govt. Departments integrated with eBiz – a single window IT platformImpetus on developing Industrial Corridors and Smart CitiesMake in India - Facilitate investment and foster innovationNew Special Economic ZonesDoing business in India just got easier – new de-licensing and deregulation measures are reducing complexity, and significantly increasing speed and transparency
16 Single window clearance for Central and State level approvals. Incentives in Special Economic Zones (For Manufacturing Units)Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units100% Income Tax exemption on export income for SEZ units for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years.External commercial borrowing by SEZ units up to US $ 500 million in a year without any maturity restriction through recognized banking channels.Exemption from Central Sales Tax; Service Tax and State sales tax and other levies as extended by the respective State Governments.Single window clearance for Central and State level approvals.
17 Incentives in Special Economic Zones (For Developers) Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA.Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act.Exemption from minimum alternate taxExemption from Central Sales Tax & Service Tax
18 INDIA Trillion $ Opportunity Real time Investment Opportunities are here!Trillion $INDIAOpportunity