Nirmala Sitharaman has her task cut out as finance minister to take India higher on the ease of doing business ranking so that the nation can hope to mount a credible challenge to China's primacy as Asia's top investment destination. One of Prime Minister Narendra Modi's priorities after returning to power with a thumping majority is to make India a premier investment destination. Sitharaman is expected to address several key issues in her maiden budget on July 5, which is also the first one of Modi 2.0.
India is ranked 77th on the Ease of Doing Business Index after a remarkable 23-place jump from the 2018 ranking of 100. I would appear that within a couple of years of such improvement India would catch up with the mighty northern neighbour. China is now placed at 46, which is 31 places ahead of India. China was at 78th position last year and improved by an impressive 32 slots to reach its present position. The pace of China's advance makes it difficult for India to catch up.
However, India Inc is optimistic that India's situation vis a vis China could improve if Sitharaman sets her mind on it. India Inc has made a series of suggestions to Sitharaman to make India more investment-friendly. Sitharaman had tweeted on June 6 asking for all stakeholders in the nation's progress to come up with suggestions on what the budget should do. Sitharaman has also been interacting with various trade and professional organisations to gauge their mood.
Captains of Indian industry have made a strong case for Sitharaman, former defence minister under whom fighter jets of Indian Air Force (IAF) crossed the line of control (LoC) to bomb Balakot, to erase the unnecessary lines of control that hamper India's industrial growth. The steps that they want include a reduction in the corporate tax rate, the abolition of minimum alternate tax, halving dividend distribution tax to 10 per cent and an increase in outlay for the infrastructure sector, reports say. The suggestions came up during the customary pre-budget consultations with the finance minister, who on her part, recalled the government's steps since 2014 to improve the country's business climate, a report in Firstpost says. CII President Vikram Kirloskar suggested bringing down the dividend distribution tax to 10 per cent from the present 20 per cent, saying it should also be not taxed at the hands of the investor, according to the report.
Sitharaman gave a hint of the government's thinking by recalling that since 2014 the government has taken measures to simplify and rationalise rules and striven to induct the information technology in a big way to make governance more efficient and effective. As a result, she added, India has considerably improved its ranking to 77th position among the 190 countries in the Ease of Doing Business report. Sitharaman also echoed the general worries about the pace of employment growth and said that the industry should accommodate more workforce to reap the nation's demographic dividend.
Assocham President BK Goenka has suggested 100 per cent depreciation in the first year of investment for all new investments. "In order to further simplify GST, we propose a dual rate (8 per cent and 16 per cent) structure for GST," Goenka said. The government is likely to address the issues of land reforms, special economic zones and the overall industrial policy to improve the investment climate. Sitharaman is also expected to further rationalise the Goods and Services Tax (GST) about which grievances persist. Make in India will continue to be a priority for the central government which dovetails neatly into the nation's push to improve ease of doing business.