Enabling legislations, financial and procedural incentives, and business opportunities for investors

Enabling legislations, financial and procedural incentives, and business opportunities for investors

Today, economy of India is the seventh largest in the world by nominal Gross Domestic Product (“GDP”) and third largest by purchasing power parity and the annual Growth rate of GDP has been 7.3% from 2011 to 2015.
The country is classified as a newly industrialised country , one of te G-20 major economies , a member of BRICS and a developing economy with an Average growth rate of approximately 7% over the last 2 decades.
One of the significant consequences of this growth has been the transformation of a primarily agrarian economy into service and Industry oriented economy.
These changes have also led to India emerging as a global center for information technology and information technology enabled Services like business process Outsourcing.
Manufacturing cost competitiveness has contributed to India becoming attractive destination for outsourcing industrial production, particularly for specialty manufacturing.
Recent global developments have demonstrated that India’s strong fundamentals and robust domestic consumption levels make it a resilient economy that can withstand global economic slowdown and declining consumption levels.

Ease of Doing Business

Ease of Doing Business is one of the important initiatives run by the Government and is crucial to the success of various initiatives such as Make in India, Start-up India, Digital India, etc.
In the current global Environment, where capital is scarce and there are countries competing for attracting the same capital, it is important to make India an investor-friendly destination.
The first step toward this objective is to do away with multiple procedures, rules, regulations and red tape and bring more transparency and clarity in policies.
Key initiatives undertaken by the Central Government for ease of doing business in India are highlighted hereunder:

Central Government Initiatives for Ease of doing business

Facilitating investments

Investor Facilitation Cell established to provide primary support for all Investment queries and for providing handholding and liasioning services to investors
Dedicated Japan Plus Cell established to facilitate and speed up investment proposals and augment economic ties between India and Japan
Dedicated desk established to facilitate and speed up investment proposals and augment economic ties between India and Korea, China, Canada, the US
E-Biz: A single-window online portal, where any investor looking to start a new business or establishing a new industrial unit, can avail core services needed to obtain necessary clearances, licenses, complete mandatory tax registrations and regulatory filing that are required to operate the business/industrial unit
Checklist with specific time-lines has been developed for processing all application filed by foreign investors in cases relating to Retail/ NRI/ Export oriented units
Investments in LLP opened up to foreign investors in specific sectors.

SIMPLIFICATION in administration of labor laws

Shram Suvidha — Multiplicity of labor laws and the difficulty in their compliance had always been cited as an impediment to industrial development. In order to redress the same, Government launched an online portal Shram Suvidha, which is expected to facilitate:
Ease of reporting at one place for various labor laws
Consolidated information of labor inspection and its enforcement
Allotment of Labour Identification Number (LIN) to units to facilitate online registration and filing of returns
Real time registration with Employee State Insurance Corporation (ESIC) and Employee Provident Fund Organisation (EPFO)

Simplifying operation of business in India

Curbing the need of Consent to Establish/No Objection Certificate (NOC) letter for new electricity connections.
Online application and monitoring for environmental and forest clearances.
Simplification in obtaining industrial licenses:
Simplified forms for obtaining industrial licence and Industrial Entrepreneurs Memorandum (IEM)
Granting security clearance on Industrial License applications within 12 weeks by Ministry of Home Affairs
Dual use items (defence and civilian items) unless classified as defence items, will not require industrial licenses
Initial validity period of industrial licenses has been increased to three years from two years to enable procurement of land and obtain necessary clearances/approvals from authorities
Frequently asked questions (FAQs) have been developed and uploaded on Department of Industrial Policy & Promotion (DIPP) website
Reduction in the mandatory documents required for import and export of goods from eleven to three

Simplification of various compliance under the Companies Act

The Ministry of corporate affairs constituted the Companies Law Committee in June 2015 to examine and make recommendations on the issues arising out of implementation of the Companies Act, 2013.

The committee suggested nearly 100 amendments to the new Companies Act to make it easier to do business in India. This includes for simpler laws to incorporate a company and to raise funds, as well as for insider trading and dealings with top executives
The Companies Amendment Act, 2015 has been passed to remove requirements of minimum paid-up capital and common seal for companies and certificate of commencement of business for private companies.
Introduction of integrated process of incorporation wherein the name of the company can be simultaneously obtained with application for Directors Identification Number (DIN)
Single process for incorporation of company, allotment of Permanent Account Number (PAN) and Tax deduction Account Number (TAN)

Moving in line with the Central Government and to attract investment in the states, the State Government took various steps to ease the governance. State government initiatives taken are highlighted hereunder:

State Government initiatives Ease of doing business

Gujarat:

Online consent system for environment clearances
Geographic Information System (GIS)-based land identification system

Maharashtra:

Unified process with single identification for Value Added Tax and Professional Tax registration
Time required for getting an electricity connection has been reduced to 21 days from 67 days and procedures involved has been cut down to 3 from existing 7
Commercial benches established in Bombay High Court to settle high value commercial disputes

Punjab:

Creation of “Invest Punjab”, as a one-stop clearance system for investment projects
Exemption to 131 industries from consent requirement by Pollution Control Board

Delhi:

Real time allotment of Tax Identification Number (TIN)
Commercial benches established in Delhi High Court to settle high value commercial disputes
Procedure and time required for new electric connection reduced.
Online portal for construction permits for residential, industrial, institutional and commercial buildings

Chhattisgarh:

Online consent and monitoring system to obtain environmental clearances
Validity of consent obtained also extended

Puducherry:

Green industries exempted from inspection by Pollution Control Committee

Karnataka:

Checklist for 86 government services and delivery timelines across 23 departments/organizations made available on Karnataka Udyog Mitra, an online portal to facilitate investment in the state

Uttarakhand:

Replacement of static check posts established by the commercial tax department for checking of the goods at the point of their import into the state with mobile squads

Boost to manufacturing through “Make in India”

Launched in September 2014, the Make in India initiative aims to achieve long-term sustainable growth of 10% in manufacturing.
The overall aim is to build best-in-class manufacturing Infrastructure-2/”>INFRASTRUCTURE by enabling investments, boosting innovation, encouraging Skill development and strengthening intellectual property protection.
This initiative focuses on 25 sectors.

Key highlights:

The Government is pushing for import substitution by encouraging local manufacturing of up to 181 imported products
New reforms have been introduced for the labor market, including a single-window labor compliance process for industries, more user-friendly provident fund facilities, and a new inspection scheme
The Department of Industrial Policy and Promotion (DIPP) is encouraging advanced manufacturing by deregulating a large number of products such as defense items, from the purview of industrial licensing
The Government has eased FDI limits in several high value-added sectors such as telecom, retail, defense, construction and railways

“Digital India” initiative to drive technology sector in India

Digital India is a US$17.7b (INR1.13t) government initiative, which aims to create an electronically connected economy, attract investment in electronics manufacturing, create millions of jobs and support trade.

Key highlights:

Under the “Digital India” initiative, also known as “e-Kranti,” the Government aims to provide digital access to all citizens in both urban and rural areas. The initiative is expected to add US$1t to the economy by 2025
It seeks to expand rural Internet coverage from 130,000 villages to 250,000 villages by 2017
The Government has allocated US$0.4b (INR25.1b) for the project in the FY16 budget. It also plans to invest US$75–84m to provide basic computer Education with the assistance of private companies
As a result of this initiative, there exist several opportunities in the fields of IT services (hardware and Software), shared service centers, knowledge services, data analytics, mobile and wireless services, business process management and IT consulting

Pradhan Mantri Jan Dhan Yojana (PMJDY): financial access for every citizen

PMJDY is a national mission, which was launched with the objective to provide Banking and financial services to all sections of the Society in an affordable manner.
These services include banking/Savings and deposit accounts, remittance, credit, insurance and pension.

Key highlights:

PMJDY aims to ensure that at least one member in every Indian household has a bank account and an insurance cover of INR100,000
The campaign aims to cover 75m households and provide a wide range of financial services to all citizens by tapping the unbanked Population in the country

“Startup India, Standup India” initiative to help boost Entrepreneurship

Launched in January 2016, this initiative aims to boost start-up ventures as a means to promote entrepreneurship and job creation in India.

Key highlights:

It provides incentives such as three-year Income tax exemption and concessions on Capital Gains tax to start-up ventures
Under the initiative, the GOI will create a fund worth INR100b (US$1.5b) to back startups
The GoI has announced the establishment of a Startup India Hub, which act as a single point of contact for interactions with the government
The initiative entails the establishment of the Atal Innovation Mission (AIM) for promotion of R&D including 500 tinkering labs, 35 public-private sector incubators, 31 innovation centers at national institutes, 7 new research parks and 5 new bio-clusters

Other recent programs:

In April 2015, the GoI unveiled a new Foreign Trade Policy (FTP), which targets to nearly double India’s exports to US$900b by 2020. Five existing schemes to promote merchandise exports have been brought under a single Merchandise Exports from India Scheme (MEIS). The Served From India Scheme (SFIS) has been replaced by the Service Exports from India Scheme (SEIS)
Jan Dhan Yojana, Aadhaar and Mobile number (JAM) trinity has been launched to deliver direct benefits to India’s poor and keep inefficient distribution of subsidies under control
In May 2015, the GoI also launched a single form called INC-29, which will replace the eight forms that had to be filed earlier to start a business
Skill India aims to provide high-quality education and training to 500m Indian youngsters by 2020
Other initiatives include the Payments and Settlement Systems (Amendment) Bill 2014, which aims to address the insolvency issue in the payment and settlement system as well as the Right to Fair Compensation and Transparency in Land
Acquisition, Rehabilitation and Resettlement (Amendment) Second Bill 2015, which would help in expediting infrastructure projects
The Government launched an “e-biz” portal in February 2015 that integrates 14 regulatory permissions in one place to facilitate easy approvals. Over time, all state and central government-to-business (G2B) services will be integrated to the portal in a bid to further ease doing business in India

Investment Opportunities in India

India provides great avenues for investments in various sectors

Automobile
Automobile Components
Aviation
Biotechnology
Cement
Chemicals
Construction
Defence Manfacturing
Education
Electrical Machinery
Electronic Systems
Food Processing
Gems & Jewellery
Healthcare
Heavy Industry
IT & BPM
Leather
Media & Entertainment
Mining
Oil & Gas
Pharmaceuticals
Ports
Railways
RENEWABLE ENERGY
Retailing
Roads & Highways
Space
Steel

Telecommunications
Textiles and Garments
Thermal Power
Tourism and Hospitality
Wellness

Make In India Programme

ABOUT THE PROGRAM

The Make in India initiative was launched by Prime Minister in September 2014 as part of a wider set of nation-building initiatives.
Devised to transform India into a global design and manufacturing hub, Make in India was a timely response to a critical situation: by 2013, the much-hyped emerging markets bubble had burst, and India’s growth rate had fallen to its lowest level in a decade.
The promise of the BRICS Nations (Brazil, Russia, India, China and South Africa) had faded, and India was tagged as one of the so-called ‘Fragile Five’.
Global investors debated whether the world’s largest Democracy was a risk or an opportunity.
India’s 1.2 billion citizens questioned whether India was too big to succeed or too big to fail. India was on the brink of severe economic failure.

PROCESS OF MAKE IN INDIA

Make in India was launched by Prime Minister against the backdrop of this crisis, and quickly became a rallying cry for India’s innumerable stakeholders and partners.
It was a powerful, galvanising call to action to India’s citizens and business leaders, and an invitation to potential partners and investors around the world. But, Make in India is much more than an inspiring slogan.
It represents a comprehensive and unprecedented overhaul of out-dated processes and policies.
Most importantly, it represents a complete change of the Government’s mindset – a shift from issuing authority to business partner, in keeping with Prime Minister’s tenet of ‘Minimum Government, Maximum Governance’.

PLAN FOR MAKE IN INDIA

To start a movement, you need a strategy that inspires, empowers and enables in equal measure.
Make in India needed a different kind of campaign: instead of the typical statistics-laden newspaper advertisements, this exercise required messaging that was informative, well-packaged and most importantly, credible.
It had to

Inspire confidence in India’s capabilities amongst potential partners abroad, the Indian business community and citizens at large;
Provide a framework for a vast amount of technical information on 25 industry sectors; and
Reach out to a vast local and global audience via Social Media and constantly keep them updated about opportunities, reforms, etc.

The Department of Industrial Policy & Promotion (DIPP) worked with a group of highly specialised agencies to build brand new infrastructure, including a dedicated help desk and a mobile-first website that packed a wide array of information into a simple, sleek menu.
Designed primarily for mobile screens, the site’s architecture ensured that exhaustive levels of detail are neatly tucked away so as not to overwhelm the user.
25 sector brochures were also developed: Contents included key facts and figures, policies and initiatives and sector-specific contact details, all of which was made available in print and on site.

Enabling legislations are laws that create a favorable environment for businesses to operate in. They can include things like tax breaks, zoning laws, and environmental regulations. Financial and procedural incentives are programs that provide financial assistance or other support to businesses. They can include things like grants, loans, and tax credits. Business opportunities are the potential for businesses to make Money. They can include things like new markets, new products, and new services.

All of these factors can play a role in the success of a business. By understanding them, businesses can better position themselves for success.

Enabling legislations can be a major factor in the success of a business. For example, a business that is located in a state with a favorable tax Climate will have a lower cost of doing business than a business that is located in a state with a less favorable tax climate. Similarly, a business that is located in a state with a favorable regulatory environment will have lower compliance costs than a business that is located in a state with a less favorable regulatory environment.

Financial and procedural incentives can also be a major factor in the success of a business. For example, a business that receives a grant from the government will have access to additional capital that can be used to grow the business. Similarly, a business that receives a loan from the government will have access to additional capital that can be used to finance WORKING CAPITAL or capital expenditures.

Business opportunities can also be a major factor in the success of a business. For example, a business that is the first to market with a new product or service will have a significant advantage over its competitors. Similarly, a business that is able to expand into new markets will be able to grow its sales and profits.

By understanding the factors that can affect the success of a business, businesses can better position themselves for success. By understanding the enabling legislations, financial and procedural incentives, and business opportunities that are available, businesses can make informed decisions about where to locate, what products or services to offer, and how to grow their business.

Here are some specific examples of how enabling legislations, financial and procedural incentives, and business opportunities can affect the success of a business:

Enabling legislations can affect the cost of doing business. For example, a business that is located in a state with a favorable tax climate will have a lower cost of doing business than a business that is located in a state with a less favorable tax climate.
Financial and procedural incentives can affect the availability of capital. For example, a business that receives a grant from the government will have access to additional capital that can be used to grow the business. Similarly, a business that receives a loan from the government will have access to additional capital that can be used to finance working capital or capital expenditures.
Business opportunities can affect the potential for growth. For example, a business that is the first to market with a new product or service will have a significant advantage over its competitors. Similarly, a business that is able to expand into new markets will be able to grow its sales and profits.

Here are some frequently asked questions and short answers about enabling legislations, financial and procedural incentives, and business opportunities for investors:

What are enabling legislations?
Enabling legislations are laws that create or authorize the creation of an agency or program. They provide the authority for an agency to exist and to carry out its functions.
What are financial and procedural incentives?
Financial and procedural incentives are measures that are designed to encourage investment. They can include tax breaks, subsidies, and other forms of financial assistance. They can also include changes to regulations or procedures that make it easier for businesses to operate.
What are business opportunities for investors?
Business opportunities for investors are the potential for businesses to make a profit. They can be found in a variety of industries and sectors. Some of the most common business opportunities for investors include:
- Start-ups: Start-ups are new businesses that are seeking investment to help them grow. They often have high potential for growth and profitability, but they also carry a higher risk.
- Expansion: Expansion opportunities exist for businesses that are looking to grow their operations. This can involve opening new locations, launching new products or services, or entering new markets.
- Acquisitions: Acquisition opportunities exist for businesses that are looking to buy other businesses. This can be a way to grow quickly, enter new markets, or acquire new technologies or products.
- Divestitures: Divestiture opportunities exist for businesses that are looking to sell off assets or businesses. This can be a way to raise cash, focus on core businesses, or exit a market.
What are the benefits of investing in a business?
There are many benefits to investing in a business. Some of the most common benefits include:
- Potential for high returns: Businesses have the potential to generate high returns for investors. This is because businesses can grow their profits over time, which can lead to higher returns for investors.
- Diversification: Investing in a business can help to diversify an investor’s portfolio. This is because businesses are not correlated with other asset classes, such as stocks or Bonds.
- Control: Investing in a business can give investors control over their investment. This is because investors can choose the businesses they invest in and the amount of money they invest.
- Tax benefits: There are a number of tax benefits that can be available to investors who invest in businesses. These benefits can include tax breaks, depreciation, and investment tax credits.
What are the risks of investing in a business?
There are also a number of risks associated with investing in a business. Some of the most common risks include:
- Loss of capital: Investors can lose all of their investment if a business fails.
- Illiquidity: It can be difficult to sell an investment in a business, especially if the business is not doing well.
- Management risk: The success of a business depends on the quality of its management team. If the management team is not effective, the business may fail.
- Market risk: Businesses are exposed to a variety of market risks, such as changes in interest rates, Inflation, and the economy.
- Political risk: Businesses are also exposed to political risk, such as changes in government policy or regulation.
What are some tips for investing in a business?
There are a number of things that investors can do to reduce the risks associated with investing in a business. Some of the most important tips include:
- Do your research: Before investing in a business, it is important to do your research. This includes understanding the business, its industry, and its management team.
- Diversify your portfolio: It is important to diversify your portfolio by investing in a variety of businesses. This will help to reduce your risk if one business fails.
- Invest for the long term: Investing in a business is a long-term investment. It is important to be patient and to not expect to make a quick profit.
- Get professional advice: If you are considering investing in a business, it is important to get professional advice from a financial advisor or investment banker.

Question 1

Which of the following is not a type of financial incentive for investors?

(A) Tax breaks
(B) Subsidies
(C) Loans
(D) Equity stakes

Answer

(D) Equity stakes are not a type of financial incentive for investors. Equity stakes are a type of ownership interest in a company.

Question 2

Which of the following is not a type of procedural incentive for investors?

(A) Fast-track approval for permits
(B) Reduced red tape
(C) Access to government officials
(D) Tax breaks

Answer

(D) Tax breaks are a type of financial incentive, not a procedural incentive. Procedural incentives are designed to make it easier for investors to do business in a particular country or region.

Question 3

Which of the following is not a type of business opportunity for investors?

(A) Manufacturing
(B) agriculture
(C) Tourism
(D) Education

Answer

(D) Education is not a type of business opportunity for investors. Education is a service, not a product.

Question 4

Which of the following is not a factor that investors consider when making investment decisions?

(A) The political and economic stability of the country or region
(B) The level of Corruption in the country or region
(C) The availability of skilled labor
(D) The cost of doing business

Answer

(A) The political and economic stability of the country or region is a factor that investors consider when making investment decisions. However, it is not the only factor that investors consider. Other factors that investors consider include the level of corruption in the country or region, the availability of skilled labor, and the cost of doing business.

Question 5

Which of the following is not a risk that investors face when investing in a foreign country or region?

(A) Political risk
(B) Economic risk
(C) Currency risk
(D) Market risk

Answer

(A) Political risk is not a risk that investors face when investing in a foreign country or region. Political risk is a risk that investors face when investing in their own country. Political risk is the risk that the government will change the rules of the game, such as by imposing new taxes or regulations, or by nationalizing assets.