Expectations from Union Budget 2016

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Abhirup LahiriSwati SinghVipul Sharma

ChanakyaCase Submission

Indian Institute of Foreign Trade | Delhi

Infrastructure

Ease of Doing Business

Start-up funding

The Selected Three

The Selected three

This slide gives us an overview of the selected three categories and reasons for choosing them

Infrastructure : corner stone of Indias growth story

Infra accounts for 31.2% of our GDPIt must be realized that 68% of India's national income (in FY '16) is contingent on 35% of stalled projects ranging from aviation to roadways to real estateAs government takes upon measures to cut red-tape, we must closely analyze how is India faring in making businesses (both core and service sector) achieve the goal of robust infrastructure for India's ever burgeoning population

Start Up Funding: aiding the process of setting up business

As we wish to cater to the large demographic of age 25-40 years, we must build the entrepreneurial streak in making our youth self-sustainable India boasts of 10,11,05,987 start ups as of 2015. Every day 10,000+ start ups are created to make India's dream the new American Dream. Again, role of ease of doing business is paramount to achieve this end

Ease of Doing Business: providing the right environment

As we wish to cater to the large demographic of age 25-40 years, we must build the entrepreneurial streak in making our youth self-sustainable. India boasts of 10,11,05,987 start ups as of 2015. Every day 10,000+ start ups are created to make India's dream the new "American Dream". Again, role of ease of doing business is paramount to achieve this end

Thus a robust infra boosted by a transparent system will foster the right environment for investors to pump in money for start ups in India. We endeavor to analyze these three factors in detail in the coming slides.

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Indian Institute of Foreign Trade | Delhi

InFRASTRUCTURE (1/2)

Policy changes in the previous budget1. A significant increase ofRs.70,000 crore in investment in infrastructure in 2015-16 over the current year, with a focus on railways and roads.2.National Investment and Infrastructure Fund will find monies to ensure an annual flow ofRs.20,000 crore to it.3. Issuingtax-free bonds for raising funds for investment in rail, roads and irrigation4.Public Contracts (Resolution of Disputes) Bill to streamline the institutional arrangement for the resolution of disputes that have stalled projects5.The budget proposed to take measures to deepen the bond market to promote investment by a Public Debt Management Agency (PDMA)AchievementsFailuresMudra Bank expected to have given advances to the tune of Rs. 1.2 Lakh Crore by the end of this fiscal year

Signing up of multi-billion dollar infrastructure projects with China and Japan304 projects still stalled with the Project Management Group of the PM's Cabinet Secretariat

NPAs of Rs. 12.8 Lakh Crore generated through stalled infrastructure projectsAnalyzing the scenario until nowInfrastructure is highly responsible for propelling Indias overall development and enjoys intense focus from Government for initiating policies. The Ministry of Road Transport outlined plans for $120 billion worth of road-widening projects, with 65% of this money coming from the private sector. There are also plans for $60 billion to be invested in Indias ports. The strong position makes infrastructure a crucial sector the Union Budget of 2016.

Infrastructure

Ease of Doing Business

Start-up funding

The Selected ThreeThis slide gives us current scenario, changes made in the previous budget and its achievements/failures in infrastructure

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Indian Institute of Foreign Trade | Delhi

InFRASTRUCTURE (2/2)

Infrastructure

Ease of Doing Business

Start-up funding

The Selected ThreeRegulatory reforms to expedite execution and financing of infrastructure projects1RecommendationImplication

Raise Public Spending through PPP modelBrown-field modernization of railway stations through Public Private PartnershipModernization of ports and setting up of automated cargo handling terminals through PPP

Will help sustain growth in core manufacturing sectors where growth has dipped by 4.6% which amounts to a loss of Rs. 56,000 cr. to the national coffers.

Reassure the strength of PPP projects through concerted effors as recommended by Kelkar Committee.2

Standardizations of labor contractsBring parity in the definition and valuation technique of works contracts under the Service Tax Law and the VAT Law. Currently VAT

Avoiding double taxation in VAT-applicable states. Taxation on receipt of advances leads to payment of Service Tax as well as VAT with a double taxation of up to 140%. This is a major additional expense in infrastructure projects.

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Banks face trouble meeting short term investment demands as most of their funds are stuck in long-term loans given for infrastructure. Infrastructure companies could issue bonds to make money for investments and the Government could earn through municipal bonds for funding infrastructure projects

Revolutionizing Bond MarketCreate a national financial intermediary to issue municipal bonds on behalf of its membersCreation of bond index to track corporate bonds and deepen investors trust.

Indian Institute of Foreign Trade | Delhi

EASE OF DOING BUSINESS (1/2)This slide gives us current scenario, changes made in the previous budget and its achievements/failures in ease of doing business

AchievementsFailuresAnalyzing the scenario until nowWith an aggressive push towards the 'Make in India' initiative, increase in FDI caps in various industrial sectors and efforts towards expediting foreign investment, the Government has made 'ease of doing business' a crucial parameter for the success of its initiatives. However, ranked 130 in the world, India has a long way to go before it can boast of a strong ecosystem of convenience for businessmen.Policy changes in the previous budget1. The application for Industrial License ("IL") and Industrial Entrepreneur Memorandum ("IEM") can be made online. 2. The country also figures among those that simplified preregistration and registration formalities such as publication, inspection among others.3. India eliminated the paid-in minimum capital requirement to start a business and also streamlined the processes to start up.4. Put in place an investor-friendly policy, under which FDI, up to 100%, is permitted, under the automatic route, in sectors like railways and healthcare.Mr Jaitely's attempts to improve the ease of doing business have yielded good result with thecountry jumping 12 ranks to 130in the latest ranking compiled by the World Bank.Red-tapism is still rampant in government institutions and fixing accountability seems a long haul even now.India still ranks below the likes of Bhutan and other LDCs in "spurious audits" of its registered companies and thus leading rampant development of NPAs in these firms.

Infrastructure

Ease of Doing Business

Start-up funding

The Selected Three

Indian Institute of Foreign Trade | Delhi

Infrastructure

Ease of Doing Business

Start-up funding

The Selected ThreeCutting down the red tape by making bureaucracy accountable and increased use of PPPExpediting registering/completion process Online issuing: building plan and completion certificatesEmpowering Architects, Engineers and Surveyors empaneled by Development Authorities to issue the building permits/completion certificate remotely.Outsourcing registration procedures to private sectorCreation of a special cell for handling clearancesAmong the various parameters in the 'Ease of Doing Business Index', dealing with construction permits is India's weakest link. Reforms would significantly improve India's ease of doing business

1RecommendationImplicationUnclogging complicated tax meshIntroducing a sunset clause on corporate tax exemptions:Phase 1: Exemptions which are not needed any more will be removedPhase 2: all open-ended exemptions would be given sunset datesPhase3: Rationalization of exemptions given for capita-linked expenditure and R&DPhase 4: Rationalization of accelerated depreciationExpedite the process of corporate tax cut from 30% to 25%in 4 years, as announced last yearFree up revenues by reducing amounts of foregone profitHelp remove the tarnish on India's image of having high corporate tax and thereby sentiment regarding ease of doing business2

It takes over 4 years to enforce a contract in India and this is an extremely weak spot for ease of doing business. Quicker settlement and streamlining of arbitration processes will help businesses clear litigation faster and expedite their growth path.3

EASE OF DOING BUSINESS (2/2)Fast Arbitration Setting up of special courts for settlement through arbitration in a time-bound manner in line with the recommendations of the Arbitration and Counciliation Amendment Bill.

Indian Institute of Foreign Trade | Delhi

START-UP FUNDING (1/2)This slide gives us current scenario, changes made in the previous budget and its achievements/failures in start-up funding

AchievementsFailuresAnalyzing the scenario until nowRightfully christened 'Startup India StandUp India', the Government is pushing job creation by leveraging the startup landscape in the country. With the introduction of new microfinance institutions, credit guarantee schemes and pools of funds, the Government is making concerted efforts towards developing India's very own Silicon Valley. This, along with the strong demographic dividend of a population below the age of 35 calls for exciting develo