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FICCIs suggestions to boost entrepreneurship and create a level playing field in India

Harshith Mallya
29th Jul 2015
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Running a startup is an uphill battle, but starting and sustaining a business in India has been considered even tougher, because of red tape and legal hassles. India recently dropping down to 119 on the global business resilience index is indicative of how acute the problem has become. But the situation is slowly improving with various initiatives taken by the government and other bodies, including the move to aggregate 36 services into eBiz Portal, 26 government services being made available online, Make In India etc.


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The Federation of Indian Chambers of Commerce and Industry (FICCI) recently arranged its National Executive Committee meeting (NECM) in Bengaluru. A spokesperson said:

FICCI is highly encouraged by various policy measures being taken by the government to enable economic progress of our nation. The world, today, sees India in a positive light. The slew of reforms undertaken by the government has left a deep imprint and investors globally are looking towards India with renewed enthusiasm. The huge thrust laid on public investments is expected to crowd in private investments in the next six to twelve months.

Here are some of the highlights from the proposals put forth by FICCI, which the body expects will accelerate the pace of investments and energies in India:

1. Reduction in lending rates: FICCI’s industry surveys show that capacity utilisation levels are still below optimal levels and that consumer demand has also not taken off in a manner that could boost investments. Interest rates have a key bearing on consumption and investment demand. Keeping this in mind, the RBI has taken cognizance of the situation and cut policy rates. However, banks have not completely carried forward this in the form of setting lower lending rates. FICCI is looking forward to deeper policy rate cuts by the Central bank and equivalent transmission of the same in the form of lower lending rates by banks for both consumers and investors.

2. Healthy fiscal management: The government has controlled the fiscal deficit even while giving a massive push to public investments. There is a need to widen the tax base, i.e. incomes above a certain threshold need to be taxed irrespective of the source. The introduction of Goods and services tax (GST) from April 2016 will mostly result in sub 20 per cent interest rates. FICCI hopes that the one per cent flexibility given to States for two years will be limited to that period only. The body also feels that it's important to pursue the disinvestment agenda to raise resources for the government, as well as to improve PSUs’ performance.

3. Strengthening Trust within Bureaucracy: The government is making an effort to re-introduce Prevention of Corruption Act. This is particularly important in view of section 13 (1) (d) (iii), which criminalises officers’ acts even in absence of mens rea. Such provisions hinder the decision-making ability of the bureaucracy, which is key in implementing the national development agenda.

4. Resolving Land Acquisition Issue: FICCI supports the government’s stand to amend the 2013 Act. Their key recommendation is to remove the private purchase of land between a willing buyer and a willing seller from the purview of the Act. Passage of the Land Acquisition (Amendment) Bill with consensus of all States is the optimal solution to enable implementation of key developmental projects that have been facing hurdles due to issues in land acquisition. In the absence of any consensus, the proposition of States to enact their own land laws aligned to their development requirements could be a useful alternative mechanism, as it would facilitate actualisation of investments across States that have hitherto not fructified due to apprehensions and uncertainty over the Land Acquisition Act.

5. Implementing Labour Reforms: Some of the suggestions in this regard include: (a) consider grand-fathering existing laws for existing work force; (b) amended contemporary laws for new entrants to the work force; (c) operationalize exit policy under national manufacturing policy; similar exit mechanism required for companies outside NIMZs; (d) workers’ housing to be an integral part of all the industrial corridors, parks, investment zones and smart cities; bring suitable schemes for the same and allocate land.

6. Implementing Power Reforms: The government has set an ambitious target of uninterrupted power for all. FICCI's recommendation is that the government could consider setting up an Energy Empowerment Committee at the State Power Ministers’ level, on the lines of GST Empowered Committee. This would require massive improvement in the governance structure of the power sector at the State level. Further, given the huge impetus on solar power, rapid investments are required for project development. There is a need to create visibility on annual capacity allocations for solar projects in the next five years as well as for creating demand visibility for solar manufacturing in the country.

7. Further Boost to Entrepreneurship: While the creation of MUDRA bank and Self-Employment and Talent Utilisation (SETU) mechanism has given a boost to MSMEs and entrepreneurship, FICCI suggests introducing a rebated income tax for small startup businesses, in essence individually owned. Based on experience in China and Singapore, the Indian scheme can be called START (Start Up Rebated Tax) wherein tax benefits should be linked to direct employment by the startup businesses. The tax benefit can be for a defined rebate proportion of say up to 50 per cent and for a limited period of say five years. One of the key issues for small business is sanctity of contracts and steps must be taken to ensure that commercial contract can be enforced quickly.

8. Level Playing Field for Domestic Industry: While FICCI considers, ‘Make in India’ to be a great initiative, an efficient and competitive eco-system for the industrial sector needs to be created to make it truly successful. So the body urges the government to look into the specific bottlenecks that have affected expansion of India's manufacturing sector. It also requests for additional push to export-oriented sectors that have been reeling under stress due to slowing global demand. Additionally, existing Free Trade Agreements (FTAs) must be reviewed and new FTAs must result in greater effective market access for Indian industry.

Website: FICCI

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