Get India To Be Worldly Wise

The Economic Times     5th April 2021     Save    
QEP Pocket Notes

Context: Need to change the mindset towards global investment for the benefit of the Indian economy.

Prospects for Indian economy

  • High growth projections: Moody’s projected that India’s Gross Domestic Product (GDP) will grow at 12% in 2021.
  • Record Foreign Direct Investment (FDI) inflows: According to the latest United Nations Conference on Trade and Development (UNCTAD) report on global FDI inflows, India attracted $57 billion worth of FDI, the highest ever.
  • Intent of open for business: The Government has shown its intent through huge public spending.
    • Budget 2021 has promised infrastructure spending of $1.8 trillion (70% of India’s GDP) over the next five years.

Challenges confronting India’s growth prospects

  • High debt-to-GDP ratio:  It already stands at 90% and will further worsen due to high spending.
    • Privatization as an answer to the debt trap may fail: because -
      • Only momentarily satiate India’s welfare aspirations.
      • History of the private sector in reneging on its loans.
      • Private debt already stands at 55%.
  • Inadequate ‘ease of doing business: India languishes in the middle of the global ‘ease of doing business’ rankings. This has resulted in many expatriates and investors leaving Indian businesses.
  • Low share of global investment: At present, out of $30 trillion global private money available, India was only able to extract $57 billion while China managed to bag $163 billion.

Way forward: Adopting a different mindset towards global investment.

  • Retaining the expatriates: By creating a holistic environment that promotes ‘ease of business’ as well as ‘ease of living’.
    • A welcome step would be to bring in reforms in personal taxation of foreign investors and expatriates coming to India.
    • For e.g Foreign citizens need time to tend to their projects for longer durations in India. During this period, while they can continue to be taxed on all income generated within India, their global income should not be taxed.
QEP Pocket Notes