A new tax system, a GIFT City set to become a model, economic growth reaching over 8%, aspirations to climb the ladder in the Ease of Doing Business index… Clearly, India has set out to unplug its potentials. Prime Minister, Narendra Modi, even said that the country “is cutting the red tape and rolling out the red carpet” to international trade and investment, during the Opening speech at the World Economic Forum,
earlier this week
At the time we were negotiating multiple agreements with India in the past, the country was far from being the power house it is today. Its economic growth is estimated at 8%, and might reach 8,3% next year. A country with such high growth can surely be of help to Mauritius,” said Usha Dwarka-Canabady, Secretary to the Ministry of Foreign Affairs, on Monday during the 3rd round of CECPA (Comprehensive Economic Cooperation Partnership Agreement) negotiations.
India, for one, is all set to pursue its economic growth, and has high financial ambitions. The country “is cutting the red tape and rolling out the red carpet” to international trade and investment, affirmed its Prime Minister, Narendra Modi, during the Opening speech at the World Economic Forum, this week. He also said that India is poised to become a 5-trillion-dollar economy by 2025. “India’s GDP in 1997, when the last PM came to Davos, was a little over 400 billion dollars. It has grown six times since,” he indicated. [Ndlr: See further down for more on Mr Modi’s speech at Davos]
A new tax reform
According to the International Monetary Fund (IMF), India will be the “world’s fastest-growing economy in 2018”. Also, last year, India jumped 30 points to become the 100th country in terms of Ease of Doing Business ranking, and the country aspires to reach the Top 50. “We want to improve on the Ease of Doing Business index. Because if a complicated and vast country like India can improve its ranking, it is going to unplug lots of potential for development”, says Manoj Dwivedi, Joint Secretary, Department of Commerce (India), in a short declaration to BIZweek at the opening of the 3rd round of negotiations on the CECPA.
He further added that there’s is a tax disruption in India. Last year, Prime Minister Modi launched India’s biggest tax reform in its 70-year history. India has moved to a single tax regime, a unique Goods and Services Tax (GST), unifying 29 states and 1.28 billion people into a single market for the first time. This decision is expected to significantly change India’s business environment. “Therefore, there is a disruption since multiple taxations have been brought under one umbrella. What we are trying to achieve is a ‘one country, one taxation’ policy. For a big country like India, it’s a big reform. It is already benefitting business and consumers. This is something which will take our economy to the next level. The Indian economy is geared up to grow, and therefore closer economic ties between India and Mauritius will provide better opportunities, to both the countries, to ride on this growth”, suggests Manoj Dwivedi.
A GIFT City
Other than tax reform, the Indian government is also betting on the GIFT City, that is the Gujarat International Finance Tec-City. An integrated development on 886 acres of land with 62 million square feet of built-up area, India’s only international financial centre includes office space, residential, schools, hospitals, dedicated multi-services Special Economic Zone (SEZ) for international operations for the services sector.
According to GIFT City Managing Director and Group Chief Executive Officer, Ajay Pandey, an investment of Rs 10 500 crore has been committed for the City. GIFT has attracted about $1.5 billion in investments. About 150 companies have started operations employing over 8,000 people. The city hopes to employ a million one day. The city focused on building an economic thread first. Residential infrastructure, starting with affordable housing, will come up next.
The City is expected to host regulatory changes that will bring India’s first centre on a par with such well-established centres in Singapore and Hong Kong. The measures include waiving short-term capital gains tax on derivatives trade, allowing retail investors to trade and removing regulatory hurdles to make it attractive for foreign portfolio investors (FPIs).
A unified financial regulator especially for India’s only international financial centre is in the works and awaiting a nod from the government after individual regulators indicated that they are okay with the idea. A unified regulator will make it easier for financial services firms to do business and will be on par with the precedence in other financial centres making it easier for firms to set up shop.
For Prime Minister Modi, the country is riding on its vast market and strong and stable fundamentals.
What PM Modi said on India at Davos
India’s reforms have touched almost all sectors, and the country is set to become a USD 5 trillion economy by 2025, says PM Modi during the World Economic Forum being held at Davos. He added the country is persisting with “far-reaching reforms”, and the first pillar is a mantra of “reform, perform and transform”.
He also affirmed that “India is an investment in future”, and that “Indians accepted in one voice and moved towards a less cash society and a unified tax system in the form of the Goods and Services Tax”.
“These two historic decisions happened one after the other in less than a year’s time. We are now a financial system which is fully prepared and integrated for digital transactions. All this has fulfilled our dream and your desire of India as one nation, one tax. It has also started a fresh journey towards a modern tax regime that is transparent, stable and predictable.”
Among other reforms which have touched almost all sectors: formalising the informal economy through demonetisation and digital transactions, direct tax reforms and expansion of the tax base, banking reforms, DBT (direct benefit transfer) through UID (Unique Identification) and bank accounts, minimising discretion, combating corruption and controlling inflation.
Furthermore, the government has consistently reduced its fiscal deficit and current account deficit. And over the last three years, the government has resolved multiple regulatory and policy issues facing business, investors and companies.
“I invite you all if you want to have wealth with health, then work in India. If you want peace with prosperity, then stay in India. If you come to India, you will always be welcome”, he concluded.