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India is one of the world's toughest places to do business. It is ranked 130th out of 190 countries in the World Bank Group's annual report on ease of doing business for 2017. This is an improvement of just one place over the last year.
The issue has struck a nerve among Indian businesses, and meant disappointment for the Modi government. So to prop-up business activity, the government has set itself a target to break into the top 50 positions.
As far as the budget announcements are concerned, the government seems all ready. It has introduced many measures in the Union Budget 2017-18 that propose to make doing business in India easier. Let's see what some of these are....
First, Mr. Jaitley amalgamated the existing labour laws into four codes: wages, social security and welfare, industrial relations, and safety and working conditions. Current labour laws are rigid and inhibit entrepreneurship, so this could bring simplicity and rationality in these laws.
Second, the finance minister proposed a roadmap for scrapping the Foreign Investment Promotion Board (FIPB) in an attempt to reduce bureaucracy. This move will promote more foreign investments into India and fuel the capital needs for Indian companies.
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Third, the budget reduced the tax burden on medium, small and micro enterprises (MSME). The government reduced the tax rate for small companies - having turnover of up to Rs 500 million - to 25% from 30.26%. It has therefore brought MSMEs in line with large companies that enjoy greater tax exemptions. The move will also provide the much needed relief to MSME businesses that have been hit by demonetisation.
The budget has also increased the threshold limit for audit of businesses who opt for presumptive income scheme from Rs 10 to 20 million, and for maintenance of books for individuals and HUF.
The budget proposed further liberalization of the FDI policy. If this goes through, there will be more businesses willing to invest in India.
Apart from the above major changes, the budget brought relief for domestic transfer pricing provisions, foreign portfolio investors (FPIs), scrutiny assessment deadlines, etc.
All in all, the budget seems to have positive policies in store to promote the ease of doing business in India. However, implementation is key, so let's see how these proposals will turn out in action.
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