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TOPIC: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

What is the US Investment Climate Statements Report?

  • This report provides country specific information and assessments prepared by US embassies and diplomatic missions abroad on investment laws and practices in those countries and other areas.
  • The report covers a range of topics that can help US investors in making informed investment decisions.
  • Some of them are market barriers, business risk, legal & regulatory system, dispute resolution, corruption, political violence, labor issues, intellectual property rights etc.
  • This report is released annually by the US Department of State.
  • The 2016 report criticizes the Modi government in some respects and praises it in some others.

The Report on India:

Criticism

  • Modi government has not lived up to its expectations. It has not matched its rhetoric on reforms with action.
  • The report doubts India’s growth rate and says that the 7.5 percent growth rate claimed by India in 2015-16 may be overstated.
  • It criticizes the slow pace of reforms in India as many important pieces of legislation fail to get parliamentary approval. The most important of them are the Land Acquisition Bill and the GST Bill.
  • The Indian economy is constrained by conflicting rules and a complex bureaucratic system that has immense discretionary powers.
  • India’s slow progress on reforms has “resulted in many investors retreating slightly from their once forward-leaning support of the government”.
  • Many sectors of the economy retain equity limits for foreign capital, which has proven to be a deterrent to investment.
  • One of the major reason for the poor rank of India in Ease of Doing Business index is enforcement of contracts. Enforcement of Contracts takes an average of 1,420 days in India. Dispute resolution costs very high to the litigant and lowers the investor sentiment.
  • Opposition from labor unions and political constituencies slows the pace of land acquisition, environmental clearances and investment policy.

Praise

  • It has make a note of PM Modi’s initiatives for improving investment sentiment for doing business in India. Some of them are:
  • – streamlining bureaucratic processes.
  • – relaxing FDI restrictions in various sectors to open up the economy.
  • – allowing 100 percent foreign investment in civil aviation, defence, certain sectors of e-commerce and the pharma sector.
  • – Make in India campaign to attract international capital to boost the manufacturing sector.
  • -making reforms to improve its ranking in the World Bank’s Ease of Doing Business index.
  • -it has allowed some retailers to source “state-of-the-art” technology in India.
  • The report also praises RBI Governor Raghuram Rajan and his monetary stewardship which further boosted investor sentiment.
  • Modi government’s efforts in improving the regulatory system by auctioning spectrum licenses and its intention to remove retrospective taxation have been praised in the report.
  • The current government has made some progress in fulfilling its mandate to build a cleaner, more market-oriented and more competitive India.
  • Despite the challenges, India offers immense opportunities for foreign investors. India’s infrastructure needs are estimated at $1.5-$2 trillion over the next 5-7 years, offering excellent opportunities for US companies.

 

 

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