Making India a Great Investment Destination
- FDI receipts of more than $250 billion in the last five years
- India needs to become an excellent place for doing business.
- This would mean working on enhancing the investor experience.
- Not just at the beginning of the project but at each subsequent step.
- We need to focus on industries where India’s manufacturing and exports are weak.
- Electronics, computers, telecom, precision equipment, factory machinery products
- These constitute 70% of global trade, but India’s share is a low 0.7%.
- A sector may generate a large turnover, but net earnings may remain small because of large import dependence.
- Assembling an EV battery from imported lithium cells or making mobile phones from imported subassemblies fall in the same low value add category.
- A better model may be inviting an anchor firm along with component suppliers and do most manufacturing in the country.
- Invite top global firms to become anchor manufacturers in priority sectors.
- Their use of innovation and technology will result in gains for all firms in the entire sector.
- In less than 20 years, the sector’s productivity, and not just Maruti-Suzuki’s productivity, went up by 250%.
- Today the automobile sector contributes to half the manufacturing GDP.
- Develop effective coordination with lead investors.
- One to one discussion at the senior level thrashes out knotty issues and builds confidence.
- Nominating an officer to coordinate with government on the firm’s behalf for the entire project cycle is a good idea.
- Provide ready to manufacture space.
- Delay in buying land and approvals drives away investors.
- Each zone should have necessary permissions for all future units.
- Industrial corridors being developed across 32 places in India under the National Master Plan may adopt this model.
- Ensure quick factory to ship movement.
- Slow factory to ship movement hinders India from becoming a part of the production supply chain.
- Locating industrial zones near the sea is another option.
- Port and customs procedures must be done in the industrial zone to avoid crowding at the port and ensuring just in time arrivals.
- Review the import duty structure.
- For example, most electronic products are assemblies of thousands of components manufactured across many countries.
- Our 90% of imports by value take place in less than 10% product tariff lines.
- For this reason, most countries charge no import duty on parts or electronics products.
- Ensure predictability, reduce arbitrariness in policy regime.
- Avoid backdated policy changes.
- Reduce scope for interpretation in tax laws by use of clear, unambiguous language.
- For example, both India and Nokia interpreted the royalty provisions of the double tax avoidance treaty in different ways a few years back.
- Set up systems for quick resolution of disputes.
- Long delays at the Indian courts compromise India’s attractiveness.
- Quick improvement is a must for improving investor confidence.
- Samsung started small in Vietnam 10 years back but, lured by good experience, expanded its operations to export more than $50 billion of products now.
- Its success also pulled others
Petrol Prices
- Petrol prices are at a 25-month high following successive rate increases by state oil companies in the last 10 days.
- Since November 19, petrol prices have risen by ₹1.28 per litre while diesel prices are up by ₹1.96 per litre.
- On Monday, petrol was available for ₹82.34 per litre in Delhi, the highest since October 19, 2018. Diesel was selling for ₹72.42 a litre, the highest since September 6 this year.
Loans
- Bank loans to most segments, including retail and housing, continued to be tepid in October.
- But loans for wholesale trade, MSMEs, loan against shares and vehicle loans were recorded at levels higher than last year.
- But loans to industry continued to contract. In October 2020, it contracted by1.7%, mainly on the back of contraction in credit to large industries by2.9%.
- Retail loans in October 2020 decelerated to 9.3%. They had logged 17.2% growth in October 2019.
- Growth in home loans fell to 8.2% compared with 19.2% growth in October 2019.
- Vehicle loans performed well, registering an accelerated growth of 8.4% in October vis-a-vis a growth of 5% in October 2019.
- Loan against shares and securities rose 23.5% from a 1.2% contraction ayear ago.
US China Tech War
- The Trump administration plans to add China’s top chipmaker SMIC and oil giant CNOOC to a blacklist of alleged Chinese military companies.
- The Department of Defense (DOD) is poised to designate four more Chinese companies as owned or controlled by the Chinese military, bringing the total number to 35.
- A recent executive order issued by President Donald Trump would prevent U.S. investors from buying securities of the blacklisted firms starting late next year.
- It was not immediately clear when the new additions to the blacklist would be published in the Federal Register, making the move official.
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