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The powerful British business daily, “Financial Times” (FT) has noted that though Prime Minister Narendra Modi is in office for nearly a year, “businesses are beginning to grumble” about his “limited progress, especially in bugbear areas such as tax.”
The top daily, in an article titled “Cairn’s woes turn spotlight on India business environment” (March 17), has said that this is one major reason why last week UK-based Cairn Energy “reacted angrily to an unexpected new $1.6bn tax demand from New Delhi.”
FT said, “Cairn’s woes attracted particular attention given Modi’s earlier promises to ease off targeting multinationals over tax.”
Suggesting there was nothing unexpected about Cairn’s objection, FT said, “The day-to-day business of dealing with inspectors remains as painful as ever.”
It quoted Anupam Jindal, chief financial officer of Sterlite Technologies, a telecoms equipment exporter based in the western industrial city of Aurangabad, as saying, “Real change in the taxation system is yet to be seen.”
Pointing out that “India’s problems are far wider”, FT said, “It limped in 142nd out of 189 economies ranked by the World Bank for ease of doing business last year — one spot above the West Bank and Gaza and well behind rivals in the Brics group of emerging economies.”
“In some areas, such as contract enforcement or construction permits, India places much closer to the bottom”, it added.
Further recalling how last month Deepak Parekh, chairman of housing finance group HDFC, reacted, calling him “one of India's most respected corporate leaders”, FT said, “Parekh made headlines by noting a growing impatience creeping in” from businesses who had seen little change on the ground”.
The daily said, “That view is largely shared by Tarang Jain, the owner of Varroc, an auto component exporter also based in Aurangabad.”
Suggesting that foreign investors “will choose to set up in India cautiously and slowly, anxious over potential pitfalls”, the daily said, “Others will instead look at more welcoming countries, especially in areas such as labour-intensive manufacturing, where Indian rules are particularly unhelpful.”
The daily commented, “Fixing India’s ease of doing business problems, say many analysts, requires more comprehensive remedies ranging from labour and energy market deregulation to wider changes to the culture of its taxation system.”
According to the daily, “Jerry Seinfeld became the latest in a long line of foreign visitors to discover that India is a tough place in which to do business, as the US comedian’s plans for two stadium shows in Mumbai at the weekend suffered last-minute cancellations following a snarl-up over permits.”
“The wisecracking comic stayed silent in the aftermath, leaving his local business partner Vijay Nair to explain to thousands of disappointed fans that a tortuous back-and-forth over parking spaces had prompted police to withdraw their licence, with grim financial consequences”, it added.
“Such high-profile bureaucratic troubles are no laughing matter for India’s image as an investment destination”, the daily concludes.
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