India’s Modi commits fully to opening economy

'Creating an enabling environment for business and attracting investments is my top priority,' said India’s prime minister Narendra Modi.

Narendra Modi says attracting investments is his top priority as he makes moves to reform India’s economy. Dhiraj Singh / Bloomberg
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India’s prime minister, Narendra Modi, has outlined plans to plough ahead with major economic reforms to improve the country’s business environment, create jobs, and attract foreign investment.

“Creating an enabling environment for business and attracting investments is my top priority,” said Mr Modi at a summit in Gujarat this week.

“We have to do this to create opportunities for our youth. With that spirit, we are moving towards implementation of some historic initiatives. This includes the goods and services tax.”

Alongside GST, Mr Modi’s government has delivered a series of reforms to improve the ease of doing business in India, which has long been notorious for its complicated bureaucratic procedures and for being a difficult place to operate.

“The insolvency and bankruptcy code, the national company law tribunal, a new arbitration framework and a new IPR regime are all in place,” said Mr Modi. “New commercial courts have also been set up. These are just a few examples of the direction in which we are going. My government is strongly committed to continue the reform of the Indian economy. We have liberalised our FDI [foreign direct investment] regime in many sectors and in various ways. India is today among the most open economies.”

India is the world’s fastest growing major economy. FDI inflows into India in the past two and a half years have reached US$130 billion, while FDI flows into India last year were the highest ever, according to Mr Modi.

But analysts have raised concerns that with a series of state elections due to take place this year, the government may refrain from introducing the big bang reforms that could upset the vote bank. Business leaders want to see long-awaited land acquisition laws and labour reforms introduced.

“The politically sensitive nature of amending land laws and loosening labour restrictions means that reform in these areas will be very difficult to enact for the time being,” said Shilan Shah, the India economist at Capital Economics. “Indeed, while the passage of the GST bill and new bankruptcy code were successes in their own right, both were largely technical reforms that political parties would not have been able to use to mobilise popular support.”

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