This article first appeared on Quartz. Share your perspective on this article with a post on ScrollStack, and send it to your followers. Contribute Now. Several global investors are in the fray to take over the fraud-hit non-banking financial services firm Dewan Housing Finance Reuters photo As the Covid slump deepens , a bunch of global investors is looking to snap up stressed Indian companies at a bargain.
Challenges of investing in India But favourable valuations and economic revival do not translate into a smooth road for global investors. So, even as the opportunities in India are enticing, they come with a big baggage of challenges. Respond to this article with a post Share your perspective on this article with a post on ScrollStack, and send it to your followers.
Digital Revolution The Government of India has taken policy decision to encourage electronic transactions and has, in this regard, announced a number of incentives. Digital technology is expanding in various sectors of the Indian economy, including money, banking, finance, taxation, e-commerce, agriculture, rural development, and governance.
In the World Digital Competitiveness Ranking prepared by the International Institute for Management Development, Lausanne Switzerland for 63 economies, India moved up four places to 44th rank in as compared to 48th rank in Its position in improved overall in all factors including knowledge, technology and future readiness in exploring more digital technologies.
It imposes limits on fiscal deficit and government debt. Goods and services tax GST , launched on July 1, , is an all-India unified, uniform, harmonized and technology-based indirect tax system. Implementation of GST in a large and complex federal system of India was perhaps unprecedented in modern global tax history. Income tax, levied by the central government, is the main source of direct tax revenue. It is levied on individuals and companies at moderate rates.
Administration of the tax is completely digitized including e-filing of returns, e-assessment, e-payment of tax and digital signatures. Robust and Resilient Financial System India with its uniquely rich payment ecosystem is now emerging as a global leader in innovative payment systems. The growth of financial services in India has largely been led by commercial banks.
Reserve Bank of India RBI provided the initial thrust and support for digital payments infrastructure and systems. Non-banks have also entered the market and expanded the range of payment services available to clients backed by their strength in technology and customer-centric innovation.
The Indian capital market is significant in terms of its degree of development, its volume of trading and the quality of its automated trading and settlement. Financial institutions particularly commercial banks and financial markets continued to function normally in India even during successive nationwide lockdowns in the wake of Covid Strong and Diversified Industrial, Infrastructural and Logistics Base India has established a strong and diversified manufacturing base for the production of a wide variety of basic and capital goods to meet the requirements of various sectors including heavy electricals, power generation and transmission, process equipment, automobiles, ships, mining, chemicals, and crude oil refining.
The country has systematically rolled out a public-private partnership PPP programme for the delivery of high-priority public utilities and infrastructure. Government is promoting PPP as an effective tool for bringing private sector efficiencies in the creation of economic and social infrastructure assets and for delivery of quality public services.
Recognizing the importance of logistics in transportation and exports, the government has included it in the harmonized master list of the infrastructure sub-sectors. This has eased access to credit and simplified the approval process for building and upgrading logistics. Thus, India jumped 33 notches in five years and made it to the top 50 among countries ranked on the GII.
Similarly, India, for the first time, made its place on the list of 60 countries for which data was published in the Bloomberg Innovation Index, report. As a debutant, India occupied 54th position in the index prepared and published by Bloomberg, a New York-based media firm. In the same survey, India ranks 36th of countries in terms of the restrictiveness of foreign ownership.
Most other emerging market countries again fare more poorly: Malaysia 37 , Mexico 42 , Korea 61 , Thailand 66 , Indonesia 69 , Brazil 70 , China 80 , and the Philippines For the acquisition of shares in an existing Indian company in the financial services sector and where the rules of the Securities and Exchange Board of India apply.
See Bajpai and Sachs Progress in the liberalization of the FDI regime has taken place since this paper was written. Gorg examines U.
The countries in the sample are the ones listed in Table 5. The estimation is done using an unbalanced panel from to Regressions using the between panel estimator conclude that the quality of infrastructure is a determinant of FDI. However, for emerging market countries time-series data on labor market indicators are generally not available and therefore they are not included in the regression analysis.
Javorcik and Spatareanu also find that, for a sample of 25 European countries, increased labor market flexibility is associated with larger FDI inflows. This analysis includes data for only a few years, and it is possible that it takes longer for approved FDI to translate into realized inflows.
The absence of consistent time-series data for Indian states precludes a rigorous econometric investigation. While there are national labor laws, states do have the power to amend national legislation. According to an assessment of the investment climate by the World Bank , Indian states with the best investment climate have on average Most studies conclude that tax incentives neither affect significantly the amount of direct investment nor usually determine the location to which investment is drawn Wells and Allen, ; Chang and Cheng, ; Foreign Investment Advisory Service, ; International Monetary Fund, ; Tanzi and Shome, ; and United Nations Conference on Trade and Development, In fact, Lim finds a negative relationship between incentives and investment, as the latter compensates for an otherwise unfavorable business climate.
A survey of firms in member countries of the Association of South East Asian Nations shows that the removal of incentives will not have a great impact on investment decisions Mirza and others, All Rights Reserved. Topics Business and Economics. Banks and Banking. Corporate Finance. Corporate Governance. Corporate Taxation. Economic Development.
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