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Rahul Nath Choudhury

Moinak Maiti

Following the outbreak of the coronavirus, which was first seen in Wuhan, a number of foreign entrepreneurs with manufacturing plants in China have lost confidence in the country and started to explore opportunities elsewhere. India has seen a potential opportunity and begun to pursue these investors, offering several incentives.
New Delhi has identified a number of industries, including electronic products, where investment can be encouraged and instructed its foreign missions to launch campaigns for the programme.
Provincial governments in Gujarat, Madhya Pradesh and Uttar Pradesh, meanwhile, have been quick to relax their labour laws and the country is also reportedly developing a land pool nearly double the size of Luxembourg to attract investors.
Politicians believe China’s negative image due to its mishandling of the initial stages of the pandemic, weak intellectual property laws and diplomatic scuffles with many powerful nations including the US, may bring in a significant amount of investment. They hope it will boost the “Make in India” programme adopted in 2014 to encourage manufacturing.
India of course desires such foreign investment, but is the nation ready to attract it? Let’s examine some of the crucial factors that could favour India’s plan to become a nodal destination for the manufacturing sector.
One of its biggest advantages lies in its growing economy. Despite the Covid-19 outbreak and nationwide lockdown, the International Monetary Fund estimates that India will be among a very small number of economies to still grow in 2020.


India offers a large market, owing to its sizeable population and growing incomes. Its enormous consumer base is a ready market, and makes investment attractive with a high potential to earn quickly.
India can showcase its favourable policy environment in appealing to investors. The government has made myriad efforts to attract foreign investors since 2014.
Foreign direct investment policy has been relaxed and intellectual property laws tightened. An “investor facilitation cell” has been set up to help investors seek regulatory approval, with hand-holding services through the pre-investment phase, execution and aftercare support.
 
Amendments to the colonial-era Land Acquisition Act in 2013 add to India’s attraction to investors by fast-tracking the approval procedure. The amendments also ensure an exemption from a social audit while seeking approval from 80 per cent of landowners affected by a proposed project in selected sectors.
If India wants to challenge China’s world factory crown, speed is key
India has introduced a goods and services tax to replace the previous century-old tax structure. This has simplified various procedures related to tax filing. Further, India’s recent amendment of the Insolvency and Bankruptcy Code prevents wilful defaulters from buying their own troubled assets at discounted rates and helps to build trust in the business community.
India’s commendable step of reducing corporate tax to 15 per cent for new companies in the manufacturing sector, announced in the latest budget, will add to its attractiveness while drawing the attention of prospective investors. Corporate tax rates are now among the lowest in the world.
Finally, India’s jump to 63rd position in the World Bank's Ease of Doing Business 2020 report, from 77th place the previous year, will also boost its plan to build trust among potential investors.
India has all the pieces in place to help boost foreign direct investment in the aftermath of the coronavirus crisis. It will be interesting to see whether New Delhi can seize the opportunities to influence those investors planning to shift their manufacturing facilities out of China.
Rahul Nath Choudhury is a New Delhi-based economist and Moinak Maiti teaches finance at the Higher School of Economics, National Research University, Russia

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On top of India’s large, ready market, its latest targeted campaign comes after years of investor-friendly moves in easing land acquisition, introducing a bankruptcy code, and simplifying and cutting taxes



On top of India’s large, ready market, its latest targeted campaign comes after years of investor-friendly moves in easing land acquisition, introducing a bankruptcy code, and simplifying and cutting taxes.


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