Open multi-brand retail, e-commerce, education to more FDI: India Inc.

The government should further ease Foreign Direct Investment (FDI) norms, especially in sectors such as multi-brand retail, education and e-commerce -- where its stance has been ambivalent till now, the country’s leading industry associations demanded. They also sought more liberalized norms for the insurance industry.

In a pre-Budget meeting with the commerce and industry ministry on Thursday, India Inc. also raised concerns on the “adverse” impact of Free Trade Agreements (FTA) on local manufacturing and demanded support to boost manufacturing, exports and startups. FTAs, they said, have led to import surges as a consequence of lower/nil duties.

“We heard the industry’s perspectives on what the Centre and the State governments can do to boost investment, manufacturing, exports and startups,” Commerce and Industry Minister Nirmala Sitharaman told reporters after the meeting. “They raised concerns on FTAs. We will look into the surge in imports and take measures to raise the competitiveness of the local industry,” she said.

On greater liberalisation of FDI in retail, FICCI said: “Taking into account the sensitivities regarding ‘protecting kiranas’, the government could consider allowing 100 per cent FDI in multi-brand retail in non-food segment such as electronics and apparel. In food space, there is scope to allow 100 per cent FDI in fresh food product retail.”

Though the BJP-led NDA government has not scrapped the previous UPA government-approved policy on FDI in retail, which allowed 51 per cent FDI in multi-brand and 100 per cent in single brand, it has so far discouraged any investment in multi-brand retail to protect the interests of traders, who represent a major vote bank for the BJP.

FICCI also sought clarity on FDI norms in e-commerce by pointing out that though 51 per cent FDI is permitted in multi-brand retail, FDI is prohibited in business-to-consumer (B2C or retail) e-commerce. It added that FDI should be allowed in B2C e-commerce in a phased manner and there could be a requirement to source significantly from within India to promote ‘Make in India’ and focus on preferable sourcing of certain percentage from SMEs and MSMEs.

On the education sector, it said 100 per cent FDI should be allowed in all service companies ancillary to education — including construction of student housing, faculty housing, sports facilities, auditoriums and related facilities.

On the insurance sector, FICCI said though the government enhanced the FDI limit from 26 per cent to 49 per cent, the provision mandating that management and control should be in Indian hands is restrictive and therefore should be done away with.

Naushad Forbes, President Designate, CII said: “We should move in the direction where there is only a small negative list of sectors and for everything else FDI should be up to 100 percent.”

NIMZ & PCPIR

Alleging “slow progress” in the implementation of National Investment & Manufacturing Zones (NIMZs), FICCI said it was important to promote the upgradation of existing industrial clusters into these zones. It also said the policy of Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) was lying in abeyance due to absence of anchor units, adding that the PCPIR policy needs modification.

Project exports

To boost exports, focus should be given to project exports, FICCI said, adding that in this regard the government needs to tweak the National Export Insurance Account scheme to give coverage to private sector projects.

The government also needs to ensure that national standards are bench-marked to the world standards in each of the 25 sectors identified for Make in India initiative, it suggested, adding that in some cases there could be a need for mandatory standards too.

FTA impact

FICCI said there was a need to review India’s existing FTAs before signing new ones, adding that the taskforce set-up to look into the impact of FTAs should consider the industry views. Ajay Shriram, past-President, CII said: “Existing FTAs should be reviewed and measures should be taken to ensure that cheap imports do not kill the existing domestic industry.”

Referring to the fall in exports both due to the lack of global demand and fierce competition, Mr. Shriram said to boost exports, the government focus on Special Economic Zones and do away with the levy of Minimum Alternate Tax and Dividend Distribution Tax on these enclaves that are fully export-oriented.

Startups

Sunil Munjal, past-President, CII, said startup should be defined as any business within the first three years of its existence, employing 50 people or less, and having a revenue of Rs.5 crore or less. He added that such startups should be given the benefits of simpler labour laws and lower tax rates.

Startups promoting technology upgradation, skill development, and women’s or rural entrepreneurship should be given additional incentives, grants and soft loans, he said.

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IT sector worried; India to take up visa fee with U.S.

India will soon schedule discussions with the U.S. to raise its concerns over the Obama administration’s recent decision to hike visa fees, official sources told The Hindu. India will also consider retaliatory measures and even explore the possibility of dragging the U.S. to the World Trade Organisation’s dispute settlement body, but only if talks fail to amicably resolve the issue.

Issues related to the tightening of the visa and immigration regime and the fear-mongering about a large number of American jobs allegedly going to foreigners have been part of the rhetoric before elections in the U.S. This time too, it is no different.

Industry bodies FICCI and Nasscom had termed America’s decision — to double the fees for certain categories of H1B and L1 visas to $4,000 and $4,500 respectively — as “discriminatory” because it will mainly impact Indian IT firms. Nasscom said the decision’s financial implications for the Indian technology sector would be around $400 million a year.

H1B and L1 visas are temporary work visas for skilled professionals. India is the largest user of H1B visas (67.4 per cent of the total 161,369 H1B visas issued in FY14 went to Indians) and is also among the largest users of L1 visas (Indians received 28.2 per cent of the 71,513 L1 visas issued in FY14).

President Barack Obama had recently signed into law a $1.8-trillion tax and spending Bill. Among other things, it authorised the visa fee hike applicable to companies employing 50 or more, and with over 50 per cent of their employees in the U.S. on H1B and L1 visas (or the 50/50 rule).

The fee thus collected, likely to be over $1 billion every year, will be utilised to finance a biometric tracking system and healthcare requirements of the 9/11 terror attack victims. The firms mostly affected by the 50/50 rule are those from the IT/ITeS sector, the largest users of the H1B and L1 visas. However, trade experts, speaking on condition of anonymity, said that to successfully challenge the fee increase before the WTO panel, India will have to first establish how Indian companies are more affected than those from other countries.

But before any action at the WTO, discussions on the issue will be held shortly over digital videoconference between both governments. These discussions will be part of the high-level India-US Services Working Group meetings, the sources said.

Commerce Minister Nirmala Sitharaman is likely soon to write to U.S. Commerce Secretary Penny Pritzker. The sources said the Indian Ambassador to the U.S. and industry bodies such as Nasscom are in touch with the U.S. administration to put across India’s view — the “huge” contribution of the Indian IT firms to the U.S. economy, as well as the adverse impact of the visa fee increase on these firms and on the temporary movement of highly-skilled professionals, mainly from the IT sector, from India to the U.S.

Pointing out that U.S. visa fee increases hurt India-US services trade, the Indian Commerce Ministry has been insisting that all visa-related issues should be part of discussions on bilateral services trade, the India-US Trade Policy Forum (or TPF, the premier bilateral platform to discuss and resolve bilateral trade and investment issues) and the India-US Strategic and Commercial Dialogue (S&CD, the primary forum to discuss issues of mutual interest on regional security, trade, economic cooperation, defence and climate challenges).

During 2014-15, India’s export of computer services and ITES/BPO services (excluding commercial presence) was around $82 billion, of which exports to the U.S. and Canada accounted for nearly 60 per cent.

The sources said the U.S. Commerce Department and the U.S. Trade Representative have informed that visa-related matters should be kept out of the TPF, S&CD and services discussions as, according to the U.S., they are security-related issues dealt by the Department of State and Department of Homeland Security.

Meanwhile, the Commerce Ministry, along with the External Affairs Ministry, are in discussions to ensure that the digital videoconference on visa-related issues happens some time soon, especially since the TPF and S&CD, both annual events, will now be held only in September-October 2016. With the presidential elections scheduled for November 2016, India is looking to resolve the issue before the term of the Obama administration ends, the sources said.

India had earlier protested the delay “on the part of the U.S.” in signing a localisation agreement to eliminate dual social security taxation. The Indian IT/ITeS sector is already burdened because in the absence of an India-U.S. Totalisation Agreement, it has to shell out over $1 billion annually to the U.S. government towards social security, with no benefit (as the Indian employees do not stay on in America) or prospects of refund.

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Traders, industrialists lobby for early rollout of GST

India’s trade bodies have come on a common platform with industry lobby groups to campaign for an early rollout of the Good and Services Tax (GST).

Trade lobbies, including CII, FICCI, Assocham, PHD Chambers, and traders body, the Confederation of All India Traders (CAIT), have for the first time issued a joint appeal to the political fraternity “to give safe passage to the Constitution Amendment (122nd) Bill,” pertaining to GST in Parliament.“The industry is in favour of GST,” said Sumit Mazumder, President of industry chamber, Confederation of Indian Industry. “It will be good for the industry and all businesses will benefit. It will unify India into one country instead of a fragmented one with every state having its own tax rate… It will dramatically improve ease of doing business in India.”

Seminar

As a part of the campaign, a seminar on GST will be held in the national capital next week, which will be addressed by Finance Minister, Arun Jaitley, and Chief Economist Advisor, Arvind Subramanian. Similar conferences are likely to be held in other States as well.

The campaign is targeted at creating awareness and sensitising the business community and political parties about the benefits of and the need for one of the biggest tax reforms in India, according to a joint statement.

“The joint campaign is derived from the idea of reaching out to political parties and trade and industry to apprise them of the advantages and benefits of GST that could accrue if implemented early,” according to the CAIT.

Praveen Khandelwal, the Secretary General at CAIT said GST was “a ray of hope to get rid of the complex taxation system since it will integrate various central and state-level taxes.”


An earlier attempt by India Inc in May to persuade parliamentarians to pass the GST Bill during the Monsoon Session went in vain.

The industry, through an online petition had urged “all political parties to have a collaborative and consultative process in the Parliament and allow the Parliament to function, to debate and legislate.” The initiative has since then received support of over 63,000 people, including top industrialists.

The government and industry is keen that the bill is approved in the ongoing winter session of Parliament so as to meet the rollout date of April 1, 2016. The bill was cleared by Lok Sabha in May and now is stuck in Rajya Sabha, where the ruling NDA is in a minority.

Any constitutional amendment bill needs to be approved by a two-third majority in both Houses of Parliament and ratified by half the state legislative assemblies before it takes effect.

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