Enhancing MNCs’ Contribution to Indian Economy

25 Dec 2020

MNCs have been playing an important role in the economic growth and development of the country, leveraging on the improving ease of doing business and liberalised regulatory environment. The Government on its part has consistently focused on easing the policy and regulatory environment for MNCs in India. Recognizing the pivotal role played by the MNCs, it has eased and enhanced the scope for their participation in the Indian economy and continues to do so. Among various initiatives, the Government has slashed the corporate tax rates, liberalized Foreign Direct Investment (FDI) policies and norms in a host of sectors and rigorously rationalized regulatory compliances burden for them. In most sectors, FDI is now under the automatic route, except for a small negative list, making India one of the most open large economies in the world.

The reforms undertaken by the Government have started bearing fruits for MNCs at the ground level as the country’s attractiveness as a global investment destination, and as a place where MNCs can do business has significantly improved. This is validated by the UNCTAD’s World Investment Report 2020, according to which India was the 9th largest recipient of FDI in 2019, with 51 billion dollars of inflows during the year.

Large number of MNCs have taken their business to the next level, positioning India both as a business hub serving global clients and as a base for exports thereby creating greater employment opportunities for the local nationals, sharing of international best practices and more importantly supporting the local community via CSR initiatives. Today, our market has become a priority for foreign companies looking to get a bigger share of the international market and they are continuously adopting strategies to expand their footprint in India. This creates a strong base for the country which is rapidly moving towards strengthening its systems through the initiative of Aatmanirbhar Bharat.

India is being increasingly seen as neutral destination in the global landscape. India received USD 70 billion from institutional investors between January 2019 and July 2020. Despite the pandemic, the country has received more than USD 20 billion investments from across the world during the first half of the year. It is important that we continue to be seen as a nation that is bridging world powers and shape our foreign policy accordingly. It is encouraging to see that the Government is working rigorously in this direction.

CII firmly believes that our Prime Minister’s vision of Aatmanirbhar Bharat will be achieved by a Jugal Bandi between MNCs and the Government and we want to keep strengthening our partnership with the Government in co-creating this vision. CII has been actively supporting the Government by way of feedback on reforms and suggestions for facilitating greater contribution of MNCs in India. The Government has been kind to our suggestions and working towards ensuring that all businesses, including MNCs, face lesser regulatory and infrastructural bottlenecks while operating on the Indian soil. CII remains committed to continue supporting the Government in making India an even more attractive destination for foreign investors.

With a view to help widen the scope for MNCs’ contribution to the Indian economy and support the Government in this endeavour, CII has been having an active ‘National Committee on MNCs’ for the past several years. The committee works dedicatedly to create awareness about reforms being introduced by the Government, assesses policy and regulatory issues at the ground level, shares best practices from across globe in various areas, and identifies scope for enhancing contribution of MNCs to the Indian economy. These objectives are met through regular meetings, representations, reports and conferences.

Over the years, CII has prepared several reports to create awareness about the importance of MNCs and provide industry feedback on what more can be done to create a facilitative environment for foreign companies. Recently, CII, in association with EY, brought out a report on ‘FDI in India: Now, Next and Beyond’. The report defines that India will be the next global investment hotspot in the next few years, leveraged by large market size, availability of skilled workforce and political stability. One of the key findings of the report is that India has the potential to attract an annual FDI in the range of $120- $160 billion by 2025, if we sustain the reforms momentum.

CII National Committee on MNCs meets regularly to deliberate on policy reforms and share feedback with the Government. As part of its policy advocacy endeavours, several Industry-Government interactions were organized to discuss issues related to MNCs. The committee also collects inputs from MNCs and submits the representations to the Government as and when they arise. A few key recommendations that have been taken up with the policy makers include:

Introduce a differential slab-based incentive as per FDI size
Make the process of the approvals related to FDI and M&A time bound
Allow FPIs to directly participate in IBC/distressed debt rather than through the route of Asset Reconstruction Companies (ARCs)
Central Board of Direct Taxes (CBDT) to consider permitting ‘E-site visit’ to be conducted electronically through video conferencing for Advance Pricing Agreement Program Procedures
Extend the benefits available under the Interest Equalization Scheme to the domestic suppliers of the manufacturer exporters
The Government may consider decriminalizing additional provisions under the Companies Act 2013
Extend / allow fast-track merger of a group companies with the approval of the regional director instead of the NCLT process in select cases
To boost investments and encourage domestic production, a designated taskforce may be formed for each sector involving representation from the relevant high-level policy makers from the Government
Continuous efforts needed in improving ease of doing business, such as: resolving issues of cumbersome and time-consuming procedures for land acquisition, registering property and land conversion; ensuring that e-courts across states are more effective to enforce contracts; deemed approvals are provided in online single window system (expected early next year), etc.

There is a robust and transformational shift in economic globalization and investments and CII believes that MNCs can play an even stronger role in supporting the Government in realizing its objective of Aatmanirbhar Bharat. To ensure the upward growth trajectory in terms of attracting foreign investment and effective capitalization of global geopolitical phenomenon like the ‘Plus one’ strategy, it is crucial to consistently work towards enhancing the efficiency of business processes, improving ease of doing business further, promoting transparency, increasing stakeholders’ engagement, bringing in consistency and predictably in policy developments, adopting international best practices and technological innovation. With a gamut of reforms being regularly implemented and attention also being paid to the effectiveness in delivery of reforms, the foreign companies look forward to a rapidly improving investment climate in India. CII remains committed to keep strengthening its partnership with the government in creating larger opportunities for MNCs to contribute to India’s growth and development agenda.

The article by Mr Soumitra Bhattacharya, Chairman, CII National Committee on MNCs and MD, Bosch Ltd & Regional President, Bosch Group in India, first appeared in the December 2020 issue of the CII Communique.