Budget takes steps to ease of doing business in India

A fortnight ago, HDFC Chief Deepak Parekh had said that there has been little improvement on ease of doing business so far under the Narendra Modi government.

Now there is lot of announcements in the Union Budget 2015/16 that could ease doing business in India.

First,  the budget has further simplified the procedures  for Indian corporate to attract foreign investments. It has done away with the distinction between different types of foreign investments , especially Foreign Institutional Investor (FII) that comes under portfolio investments,  and Foreign Direct Investment ( FDI).

The Budget has replaced the individual cap with a composite cap. Take for example, the insurance sector has a composite cap of 49 per cent for foreign investors, which could be a mix of FIIs and FDI.

The Budget has also taken steps to simplify regulations. It has proposed to merge the Forward Market Commission (FMC), which regulates the commodity markets, with the Securities and Exchange Board of India (Sebi), the capital market regulator.

The Budget also addresses the lack of common approach in the regulatory arrangement within the infrastructure sector like ports and roads. "We propose to introduce a regulatory reform law that will bring about a cogency of approach across various sectors of infrastructure," said Finance Minister Arun Jaitley.  This would be a great help to many infrastructure companies that have multiple businesses like ports, power, roads and airports.

There are also proposals for speedy resolution of disputes. Today, the dispute arising in public contracts take a long time to resolve and the process is also very costly.

The Budget has proposed to introduce  a public contracts ( Resolution of Disputes ) Bill to streamline the institutional  arrangements for resolution of such disputes.

Similarly, for the quick resolution of commercial disputes, the budget has proposed to set up exclusive commercial divisions in various courts in India.

The banks, too, heave a sigh of relief  as they no longer have to run after corporate defaulters in courts to recover their money. The bankruptcy law reform has been identified in the budget as a priority for improving  the ease of doing business in India.

In the past, the DRTs, SARFAESI, BIFR and Sick industrial Company Act have failed miserably in a speedy resolution of bad assets. Jaitley has promised that the government will bring a comprehensive Bankruptcy Code in 2015/16 that will be of global standards.

The US has Chapter 11 where a corporate in distress gets a speedy  resolution by way of a restructuring or sell off.

Last but not the least there is some ease for the foreign travellers. After introducing visa-on-arrival for tourists of 43 countries, the list has been expanded to 150 countries.

The measures  initiated in the budget are not enough to address many of the issues connected with ease of doing business. But a beginning has been made in the right earnest in the current budget. Parekh would surely agree.