H.E. Narinder Chauhan, Ambassador of India

INDIA: Bright Spot In A Gloomy World

With the government’s ambitious reform moves, India is set to record further economic growth in the years ahead

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The year 2015 saw a new, resurgent India under the dynamic leadership of Prime Minister Narendra Modi, both on the political and economic fronts. The government launched a series of initiatives designed to encourage investment, including FDI, and to make India an easy and simple place to do business. New flagship schemes, such as Make in India, Digital India, Smart Cities, Financial Inclusive programmes etc., were launched to boost the country’s economy.

Today, there is a new vibrancy and new energy in India. India has opened up all major sectors to FDI and is the world’s most open economy. Foreign direct investment flows during 2014-2015 reached $44 billion, representing a 48 per cent upsurge this year in dollar terms. The country expects this to double next year. FDI also exceeded the current account deficit for the first time in seven years.

The government’s continued push towards FDI liberalisation will continue to ease FDI flows. The Financial Times’ ranking of the top destinations for greenfield investment (measured by estimated capital expenditure) in the first half of 2015 shows India at number one, having attracted roughly $31 billion – some $3 billion more than China and $4 billion more than the U.S.

The jump in India’s position to 55th place on the global index of the world’s most competitive economies, compiled by the World Economic Forum, underlines the country’s recent economic recovery

In an environment where economic growth is modest, India today stands as a bright spot among the global economies. The International Monetary Fund (IMF) projected in its report that India will grow at 7.3% in 2015, rising to 7.5% in 2016, benefiting from recent policy reforms, a consequent pickup in investment and lower commodity prices.

Administrative reforms and simplification of approval processes, including online project approval and easier environmental clearance procedures, are expected to improve business sentiment and the ease of doing business in India. The government has set an ambitious deadline of 2016 for implementing the Goods and Services Tax (GST). A clear cut road map for lowering corporate tax from 30% to 25% over the next four years has been laid down.

Other forward-looking government initiatives include a nod for IPOs/FPOs by banks to raise funds, as long as government equity remains at 52% or over; a nod for real estate and infrastructure investment trusts, with tax benefits; and a nod from the Cabinet for the ‘100 Smart Cities’ project.

$130 billion has been proposed for spending on railways over five years, on schemes including high-speed trains, while two rounds of coal block auctions have been concluded successfully, with more lined up. An impasse in the mining sector ended with the passage of a new bill for regulation and development.

There has also been the successful conclusion of auctions for telecom spectrum for mobile telephony and broadband…