One-sop approvals portal can be FDI game-changer

Story by  Sushma Ramachandran | Posted by  Aasha Khosa • 2 Years ago
Prime Minister promoting Make in India mission
Prime Minister promoting Make in India mission

 

Sushma Ramachandran 
 
The launch of a single-window system to enable domestic and foreign investors to get regulatory clearances from central and state governments is a giant step in cutting red tape in this country. The new portal has been a long time
coming especially as it was highlighted in the proposed Make in India plans Outlined by the Prime Minister, five years ago. The idea of a similar one-stop shop for clearances has also been talked about for years by successive
governments but has only now become a reality. To put this single window system in context, one must remember that even last year’s Economic Survey had disclosed that any fresh investor needs about 6700 sets of approvals to
start a business.
 
The process of making fresh investments in this country is thus an extremely daunting affair and it is virtually miraculous that it is taking place at all. One of the major reasons for investors to go through this gauntlet of clearances is the vast potential of the Indian market. A recent survey by a global consulting firm, Deloitte, of corporate leaders in several countries, showed that the main attraction for many was the size of the domestic market. As a result, there was
little interest in creating an export hub or forming part of global logistics chains. It is quite possible that the new portal may alter investors' expectations and aims in this regard.
 
According to the initial outline of the National Single Window System (NSWS), it will provide information about regulatory approvals from 18 central departments and nine state government departments. Another 14 central and five state government agencies will be added by December this year. The official statement mentions it will provide end-to-end facilitation and support to investors, facilitate clearances at the central and state levels, provide pre-investment advisory to new businesses and share information related to land backs. All information will be available on a single dashboard which will be used to put in and track applications, bringing in greater transparency and responsiveness, it is stated.

For the time being, the beta version of the dashboard will be available to the public and stakeholders. It will take another three months to stabilize and bring industry feedback on board. 
 
The new portal has emerged at a time when foreign direct investment is ising in a sustained way, apparently despite all odds. Even during the last fiscal when Covid led to a 7 percent contraction in economic growth, FDI inflows continued to be surprisingly robust. These rose by about ten percent from 74.39 billion dollars in 2019-20 to 81.72 billion dollars in 2020-21. And this is when global FDI flows fell from 1.5 trillion dollars to 1 trillion dollars over the same period. According to the UN Conference for Trade and Development (UNCTAD), India is currently the fifth-largest recipient of FDI inflows in the world.,
 
The recent Deloitte survey, conducted during the peak of the second Covid wave this year, also indicates that India continues to hold considerable interest for foreign investors. The survey was conducted among corporate leaders from
the U.S., the UK, Singapore, and Japan. It showed that this country was considered an attractive destination primarily owing to its skilled workforce and prospects of economic growth.
 
Another major factor for investing in this country is the perception of political and economic stability. At the same time, multinational business leaders are concerned about the lack of regulatory clarity and efficient judicial redress and
mechanisms. It must be clarified that the survey was carried out before the government had withdrawn the retrospective tax law and begun the process of ending all related legislative action.
 
One of the big fears of foreign investors has been the lack of predictability in tax laws stemming directly from this particular issue. In the case of Cairn Energy, the issue had snowballed to the extent that international arbitration had been resorted to and ultimately there was even talk of the company trying to acquire Indian assets abroad as compensation. All these tangles are now likely to end with the reversal of the retrospective tax law. This in turn has provided reassurance that there will be a more secure and predictable environment for potential investors in this country.
 
The Deloitte survey also found that as many as 44 percent of investors from these four countries were keen to make additional or fresh investments here. Of the first-time investors, as many as two-thirds were planning to do so in the next two years. Thus the outlook is bright for investments in the short run. In case this scenario turns out to be correct, it will give an impetus to economic growth which has been languishing since last year.
 
The new one-stop-shop for clearances should greatly ease the process of doing business in this country. But one must be cautious about the actual implementation. The plus point should be that the investor does not have to submit innumerable applications to multiple agencies. It has happened in the past that despite the process of digitisation, government departments demand physical applications to go along with digital submissions. A case in point is
the income tax authorities having a provision to send physical applications for duplicate PAN cards through courier to their offices. The requirement followed an elaborate online application submission. It is essential to ensure that online
approvals do not have to be accompanied by mandatory physical submissions even in the case of this new portal.
 
The new portal has to prove its effectiveness after its final version is stabilised by the end of this year. Much work will be needed to iron out the glitches. But in case it manages to reduce red tape by even 50 percent, it will be a game-changer for the country’s investment scenario.