In the Indian context, deep-rooted bureaucratic bottlenecks and abysmal performance of the manufacturing sector are critical impediments. Bureaucratic delays dogging the business environment in general and the infrastructure sector in particular, which is subject to multiple approvals across levels (Central and state level approvals, inter-ministerial approvals); and lack of infrastructure and unskilled workforce in the manufacturing sector, need immediate attention.
Various policies have been unveiled but failed to move from 'paper to practice'. Implementation being the foremost objective, this shift needs to see traction in the infrastructure and manufacturing sectors, which have been globally acknowledged as the growth drivers for sustainable development. Adoption and implementation of meticulously thought-out policies help not only upgrade related sectors but are also likely to achieve inclusive growth. For example, through the Skill India Initiative, the youth of India can gain knowledge, enter the economy well educated and employable, contribute to the GDP, earn a livelihood and raise their standard of living.
'Single window clearance' needs to move from paper to practice to increase India's' ranking in ease of doing business and put infrastructure projects back on track. Single window, apart from easing the approval process, should be aimed at easing the compliance burden and reducing filings with multiple regulators.
Both infrastructure and manufacturing are labour intensive and are plagued by outdated labour laws. For the 'Make in India' movement to take action, reforming the labour laws is critical. Similarly, the land acquisition bill needs to see the light, without which ambitious projects like the Delhi Mumbai Industrial Corridor, National Investment and Manufacturing Zones, Smart Cities, which are expected to generate employment, will fail to take off. These projects once implemented could end up contributing a lion's share to the growth of the economy including the fiscal kitty given that this does have an impact on the purchasing power.
With Budget 2016 round the corner, expecting tax incentives is obvious, but generally tax incentives are avoided when inclusive growth is sought to be achieved. And specifically so, for the current roadmap that emphasises no incentives and soft corporate tax rates. It would be worthwhile to take stock of some of the other emerging economies including some of the developing nations, which do have lower corporate tax rates and incentives for some of the key sectors. An investment-linked incentive with the implementation of Goods and Services Tax should propel the much stagnant players in the infrastructure space, which act as catalyst for other sectors as well.
At the same time, certainty and clarity in taxation will provide significant relief, especially to non-resident investors seeking to invest in India post the easing of FDI policy. High pitched assessments and denial of tax incentives due to lack of clarity or ambiguous provisions need to be addressed on priority. Enabling provisions in tax laws to enable Central Board of Direct Taxes to issue guidelines for completing high pitched litigation, by issuing position papers on contentious issues should help to free the funds locked in dispute, for Government as well as taxpayers.
India has reached a crowning point; all eyes are now set on how the Finance Minister achieves this arduous task of fuelling economic growth and channelling policy initiatives into action through a concerted effort.
(The author is Partner, BMR & Associates LLP. The article has inputs from Shabala Shinde and Mansi Sanghavi)