“The public sector is essential but at the same time the role of the private sector is also vital. Take any sector- telecom, pharma- we see the role of the private sector. If India is able to serve humanity, it is also due to the role of the private sector.”
Uttering these historic words from the floor of the parliament, Prime Minister Modi echoed the thoughts of New India that respects entrepreneurs and job-creators.
India has also translated these words into action with the 2020 edition of the World Bank Report on Ease of doing Business acknowledging India as one of the top 10 improvers, third time in a row, with an improvement of 67 ranks in 3 years. India has improved its rank in 7 out of 10 indicators and has moved closer to international best practices too.
The last year particularly has seen many historic reforms being passed that have significantly improved Ease of doing Business in India.
Labour Reforms Promoting Both Labour Rights and Investment Passed
The gargantuan maze of labour laws in India with 44 Acts containing 1,458 sections have been simplified into 4 codes with just 480 sections. These codes are the Code on Wages, the Industrial Relations Code, The Occupational Safety, Health and Working Conditions Code and finally the Code on Social Security.
This simplification has made it easier for authorities to implement labour laws as well as improve compliance for companies by removing unnecessary ‘inspector raj’ provisions.
Expanding labour rights, gig workers have been provided a social security net making India one of the few countries in the world to bring in such a labour-friendly move.
With moves like fixed term contracts being enabled for all establishments and most compliance regulations being made self-certifying, India has become a very attractive market for investment and industry.
Next Generation Ease of Doing Business Reforms in IT and BPO Industry
India has one of the most vibrant IT/ITeS sectors in the world which has received a booster dose with the government radically reducing the compliance burden of BPO and IT/ITeS sector and simplifying the guidelines applicable to Other Service Providers in India.
Registration requirements and other restrictions, such as the need to furnish bank guarantee, regulations preventing companies from adopting ‘Work from Home’ and ‘Work from Anywhere’ policies have also been scrapped.
The new framework promotes a conducive environment for exponential growth and innovation in IT/ITeS and BPO sectors in India.
Opening the Doors of Geospatial and Space Sector to Private Sector
Start-ups and companies in the private sector in India got a big boost with the government announcing that the space sector is being opened up for them and also giving them access to ISRO facilities for testing and launching of space technology. This will enable start-ups and innovators to further develop the space technology ecosystem in India.
Cartography and map making which were long exclusive domains of the government have also been liberalised enabling start-ups and innovators to enter this space and develop indigenous capacity in this crucial field.
Cartography and mapmaking has critical geostrategic and economic importance impacting urban development, energy, transportation and ecommerce which can now be further leveraged by utilising the strength of the private sector.
Decriminalisation within Companies Act to Promote Greater Ease of Doing Business
Adopting the mantra of ‘simpler regulations, more compliance’, 48 sections of the Companies Act dealing with minor, procedural and technical offences have been decriminalised. 23 of the remaining 66 compoundable offences can be resolved through in-house adjudicating mechanisms by the company.
By decriminalising offences which were procedural and technical in nature, the government has in one stroke reduced the litigation burden on the system as well as ensured greater ease of doing business for companies in India.
Clear Cut Disinvestment Policy Creating More Avenues for Investment and Jobs
For the first time in India, a clear policy to disinvest and privatise Central Public Sector Enterprises (CPSE) has been announced. Under this policy, CPSEs have been divided into strategic and non- strategic sectors.
In non-strategic sectors, all CPSEs will be privatized.
Strategic sectors are:
Here, only a few CPSEs per strategic sector will remain, and the rest will be privatised or consolidated. This will enable a new infusion of private capital, technology and best management practices into these companies, creating new jobs and contributing to economic growth.
In addition to expediting the already undergoing privatisation of certain CPSEs like Air India, BPCL and IDBI, privatisation of 2 Public Sector Banks and 1 General Insurance Company would also be done in 2021 showing the reformist credentials of the government.
Enabling Locked-up Liquidity to Flow from Financial Institutions
Passing of Bilateral Netting of Financial Contracts Act 2020 in the Parliament has enabled locked up capital in financial institutions to be opened for lending. With this move, India has adopted another international best practice in the financial sector.
This move has a dual advantage as it not only helps financial institutions to evaluate financial risks in a more real-time basis but also enables release of large amounts of locked up capital for onward lending especially in times of pandemic. It also allows for development of a proper corporate bond market in India which would allow companies, especially smaller ones to tap it for more liquidity.
The above path breaking reforms along with previous reforms like enactment of insolvency and bankruptcy code, GST, reduction of corporate tax, streamlining of personal income tax and FDI reforms such as easing local sourcing norms for FDI in Single brand retail trading and 100% FDI under automatic route for coal mining have made India a top destination for investment.
This is evidenced by the highest ever FDI inflow of $81.72 billion in the FY 2020-2021 even amidst a pandemic into India. In 2019-20, India registered an annual FDI inflow of $74.39 billion, showing the ever-increasing interest in investing in India. India also recorded the highest ever FII inflows of $37.6 billion in 2020-2021 which is greater than the cumulative inflows of the last six years!
India under PM Modi is enacting all the necessary reforms to tap the vast potential of entrepreneurship in the country to realise the vision of Aatmanirbhar India with a $5 trillion economy.