India News Wrap: November 5
In this section, ASG covers a few relevant developments and announcements of the last two weeks, with insights on their implications for businesses.
India-Africa Forum promotes relationship, builds concrete road ahead
The India-Africa Forum is being perceived as this government’s “great Africa push” and could expand trade and investment prospects between the resource-abundant continent and India.
The third India-Africa Forum, which concluded recently, launched an era of partnership and rekindled dialogue between India and delegates representing 54 African countries. In addition to trade and commerce, the forum concentrated on issues pertaining to human resource development, infrastructure, institution-building, clean energy, health, education and skill development that are crucial for the development of all participating countries. A broad consensus emerged on some issues, including making global governing institutions like the Security Council more representative. To provide further impetus for economic cooperation, India extended financial support to Africa in the form of a new line of credit.
A series of ministerial level meetings commenced on October 26 in the run-up to the summit, which had unprecedented participation this year. The summit focused on the needs and strengths of Africa, and was yet another example of the Modi government's proactive foreign policy and continued efforts to position India as a leading global power by strengthening its diplomatic relationships.
India ranks 130th in Ease of Doing Business
In a market that has been regarded as difficult to do business in, the improvement is an indicator that the Modi government’s reforms are beginning to bear fruit.
In its annual Doing Business Report 2016, the World Bank ranked India 130th out of 189 countries. India jumped four spots up the ranking this year. Several major reforms, including new commercial courts, easier entry and exit, the launch of state-level ease of doing business rankings, and the report of the committee on bankruptcy were not accounted for in the new ranking, which only considered developments through May of 2015.
“We're hoping to jump 30-40 places in the next year's report. Given the pace of reforms, we'll definitely break into the top 100 next year,” said Amitabh Kant, secretary of the Department of Industrial Policy and Promotion, the agency which has been tasked with improving India’s business environment. To meet this goal, the government will have to continue to deliver on its planned economic reforms, which include the crucial Goods and Services Tax (GST) Bill and state-level labor and land reforms.
In its quest to improve the ease of doing business, the government has undertaken several key reforms in the last month:
Government seeks swift settlement of commercial disputes
The government has used its executive power to amend legislation to expedite the resolution of commercial disputes, a key concern for businesses.
The Union Cabinet, headed by the Prime Minister, has cleared two ordinances – executive orders that later must be passed in Parliament – to amend existing legislation concerning commercial disputes. The amendments allow for a time-bound resolution of conflicts, create incentives for arbitrators to reconcile cases, and allow a six-month fast-track procedure on mutual agreement between parties.
Plans underway to overhaul the antiquated bankruptcy law
The Indian government is working on a new bankruptcy code to replace the century-old bankruptcy law. The new code is expected to address the long-standing concerns of creditors and businesses.
The government is keen to amend the bankruptcy law in the upcoming winter session of the parliament as part of its reform agenda. Efforts are already underway, informed by recent recommendations by a government appointed committee.
Creditors in India face major issues in cases of insolvency, with respect to the amount they are able to recover and the time it takes to do so. The inability to collect on dues has also locked up funds at banks, with stressed assets at their highest level in more than a decade. The proposed bankruptcy law seeks to expedite the pace of liquidation in cases leading to insolvency.
The major reforms under consideration include setting up a special regulator to look into bankruptcy cases and making it mandatory to make a decision on liquidation of a company within 180 days.
Japan, Singapore to help Andhra Pradesh build new capital
The state government of Andhra Pradesh continues to actively pursue foreign support to build a business-friendly capital.
Prime Minister Narendra Modi recently laid the foundation stone for Amaravati, the new capital of the truncated Andhra Pradesh. Costing more than $16.5 billion, the city will be developed as a futuristic, world-class smart city.
Andhra Pradesh Chief Minister N Chandrababu Naidu and Japanese State Minister for Economy, Trade and Industry Yosuke Takagi signed an MOU to promote investments by Japanese companies in the state. Singapore government agencies have already helped the state plan a three-layered capital with a seed capital, a capital city and a capital region. The finance department of Andhra Pradesh and Japan Bank for International Cooperation have signed a separate pact to invite foreign investments.
The bulk of the construction is expected to be carried out through the public-private partnership model and the state is in the process of appointing a master developer for Amaravati. With the state already strapped for funds, the government is relying on a master developer to bring in investments. Some of the major milestones will be a 26km metro project and a greenfield airport.
With one of the most proactive Chief Ministers who is regarded as a proponent of private and foreign investment, Andhra Pradesh is expected to become a hotbed for investments, with an objective of attracting $30 billion in investments over the next decade.