Question

In: Economics

Read the text below and answer this: What regulatory steps can the Indian government take to...

Read the text below and answer this: What regulatory steps can the Indian government take to make the environment more hospitable to investors?

Excessive red tapism, poor infrastructure, complex tax policies, protectionist labor laws, high licensing and inspection costs, congested judicial system and land acquisition problems are major bottlenecks forcing investors from Korea to opt for other Asian countries over India, according to a study by apex industry body ASSOCHAM.

"With just 1.25 per cent share i.e. about $2.6 billion of Korea's $215 billion worth total overseas investments till the end of 2012, India figures quite low on the list of favored investment destinations for Korean companies evidently as investors from Korea have pumped in $39.67 billion in China, $14.18 billion in Hong Kong, $8.38 billion in Vietnam, $6.73 billion in Indonesia, $4.65 billion in Singapore, $3.95 billion in Malaysia and $3.81 billion in Japan," noted a report titled 'India-Korea: Eliminating Barriers and Increasing Investments,' prepared by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

"Though the bilateral trade between India and Korea reached $19 billion clocking nearly 20 per cent growth during 2012, it is relatively low compared to the size and structural complementarities of the two economies," said the ASSOCHAM report.

"Korean FDI inflows have been growing at a very tardy pace as their companies seem to be keener to explore other emerging markets more so as many of them feel that if big company like POSCO can face difficulties, despite government assurances, it would be even tougher for smaller companies to survive in India," highlighted the ASSOCHAM report.

In its report, ASSOCHAM has suggested the government for speedy administrative processes for approval and clearance of big-ticket investment projects through fast track process, development of dedicated world-class industrial parks and supporting infrastructure like logistics, power and water supply, carrying out tax reforms like early introduction of goods and services tax (GST) and developing social infrastructure like Korean restaurants, recreational facilities and others.

"South Korean companies can forge business alliance with their Indian counterparts to become partner in infrastructure development as India plans to tap $1 trillion in infrastructure sector by 2017," suggested the ASSOCHAM report. Moreover, there is vast scope to boost trade in services like information technology (IT), information technology enabled services (ITeS), communications, banking, insurance, education, broadcasting, tourism and healthcare.

The chamber study further states that automobile, infrastructure, nuclear and renewable energy, defence, small and medium enterprises (SMEs) and shipbuilding are some of the key areas with significant potential for investments and co-operation between India-Korea.

Besides, there is tremendous potential for India and South Korea to work together and explore possibilities of promoting third country exports by taking advantage of the various rationalised procedures and investment norms applicable to the Special Economic Zones (SEZs), added the ASSOCHAM report.

India may act as an ideal destination for Korean companies to relocate to counter growing labour scarcity and rising wages back home thereby taking advantage of India's cost-effective human resources, it added.

Further, there is also scope for the two Asian giants to take leverage from complementarities in case of India's growing knowledge-based service industry and Korea's hardware and manufacturing-based economic structure. Besides, India's capabilities in pharmaceutical industry, IT software and auto components indeed complement Korean competence in heavy engineering, automobiles, machinery and electronic hardware. Also significant opportunities for bilateral co-operation also exist in the area of internet and e-governance.

Solutions

Expert Solution

As far as the article is concerned the facts and figures are almost 7 Years old as of 2012 we are into 2019. Now the basis of the article is on the reports published by ASSOCHAM. Which has mentioned several factors such as Excessive Red Tapism, Poor Infrastructure, Complex tax policies, Protectionist Labor laws, High Licensing and inspection costs, Congested Judicial system and land acquisition problems.

It worth mentioning that In Economics and International trade relations the Political and Economical situation of a country is considered a line where all other deals are done with collateral interests. In 2012 the Government of India or we can Say the UPA (United Progressive Alliance) was a mix of group of Political parties in which the single largest Congress Party was not in a position of complete majority. The coalition Government was bound to take decisions based on the choices of their partners associating them. The Political will is necessary for a revolutionary approach, that was missing during the tenure of Government run by UPA (United Progressive Alliance).

After the Lok Sabha elections in 2014 The New formed Government formed Under the Prime Minister Narendra Modi has achieved minimum required seats with absolute majority in the Parliament. We can see remarkable changes afterwards.

Now in 2019 if we talk of the journey India has moved on worth mentioning points below which will completely answer this question -

  1. India is 7th largest Economy if we consider on the basis of Nominal GDP, and again it is the third largest economy if we consider Purchasing Power Parity.
  2. Today India's average growth rate is above 7%,one of the fastest growing economy in the world, even surpassed China.
  3. India has become the largest exporter of IT services, Business Process Outsourcing with revenue generation of $154 Billion.
  4. The Indian Automobile Industry is one of the largest in the world with annual production above 21 Million.
  5. India is above $700 billion worth of Retail market and one of the fastest Growing e-Commerce Market.
  6. India has jumped to 23 positions against its previous ranking. Now the latest position is 77th among 190 nations of the world.
  7. India has one of the fastest growing Service sectors in the world with annual growth rate of 9%.
  8. Today Japan is Investing hugely into the Dream Project of High speed rail corridor The Ahmedabad to Mumbai Bullet train Project. Japan is investing $12 Billion for the project almost 81% of the investment.
  9. India has launched Mangalyaan Mission to Mars orbiter which costed $74 Million against NASA's MAVEN Mars Orbiter costing $672 Million.
  10. 104 satellites launched by India on 15 th february 2017 is a remarkable achievement. Indian space agency has achieved cost effective launching capabilities. Because of the same reason almost every country of the world is in contact with ISRO to launch their satellites.
  11. India has developed Train 18 the make in India Semi High speed Train.
  12. India is on a move to Multi combat Fighter Tejas which is again Make In India initiative.
  13. Created various Dedicated Freight corridors.
  14. Special Economic Zones are being developed for Trade purposes. The sea ports are equipped with ultramodern facilities.
  15. India is moving forward to Metro projects in alliance with the SMART City project.

The above mentioned points definitely confirms that India has done remarkable achievements and still moving strong creating foot-marks all over the world.

The various steps taken for Economic and Trade Reforms and Tax Reforms also -

  1. Start-Up India Project - It is New Initiative of Indian Government promoting Entrepreneurship , Nurturing and facilitating early startups.
  2. Make In India - Transforming India into global manufacturing Platform is the base of this initiative. Indian Government is welcoming Manufactures from all over the world to have a set up here. Helping them for their establishments and giving them easy licensing and business environment to grow with.
  3. GST -India has successfully Initiated a new tax reform. The GST has been accepted into the Indian Taxation system.
  4. 100% FDI has been allowed to Specific Rail Infrastructure Projects.
  5. 100% FDI under automatic route for Medial device manufacturing has been permitted.
  6. FDI policy in Insurance Sector has been Increased to 42% against 26% previously.
  7. Removal of conditions of area restriction of floor area of 20,000 Sq. mtrs. In construction development projects.
  8. 49% FDI in defense sector.
  9. Open e-commerce platforms for foreign sellers.
  10. FDI policy on wholesale cash and carry activities has been provided to single entity.
  11. FDI cap on Credit Information Companies has increased to 100%.
  12. India has attracted $31 Billion FDI as compared to China - $28 Billion and United States - $27 Billion.
  13. Ministry has removed the older FIPB (Foreign Investment Promotion Board) and regulated new platforms & Automatic Routes. Standard Operating Procedure (SOP) has been initiated for early processing of the necessray documents.

The above mentioned Initiatives have been the recent measures of the Indian Government that has Increased Economic Growth of India. As of the report of ASSOCHAM of 2012 the recent developments till 2019 has almost answered all the queries.


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