8203 Economic Environment of Business

Assignment
Submitted To : Dr Seema Joshi Submitted by: Kritee Manchanda,
Roll No: PhD18-34

“India is on the path to long term prosperity because of the introduction of

structural reforms in post 2014 period.”

With GDP growth at sub 5%, decline in employment generation, revenue

buoyancy being low and the country becoming investment starved, 2014 was one
of the most challenging years for India. In fact, the 2014 general elections, after
thirty years, gave majority to a single party in the Lok Sabha brought in an air of
freshness. This victory was very significant due to following reasons:

1. Requirement of a leadership uninfluenced by corruption, coalition and

policy paralysis at that time.
2. High expectations from single party ruling after a long time

 While overcoming all these in May 2014, Shri Narendra Modi came to
power by gigantic agenda. Main focus is to increase foreign investments,
simplification of the rules and procedure leading to improve ease of doing
business.
 Since 2014 a great reform is achieved in the economy of India. According to
Pew research data 83% of people of India are very satisfied with current
economic condition of the country and that satisfaction level is ever so high
in last 5yrs.

Hence, the Government led by Prime Minister Shri Narendra Modi promised to be
decisive and firm beginning an era of reforms and growth. The Government has
been undertaking more reform oriented measures than any Government in recent
memory. Some of the major reforms are :

1. GST – Goods and Services Tax

2. Demonetisation
3. RERA - The Real Estate (Regulation and Development) Act, 2016
4. IBC – The Insolvency and Bankruptcy Code, 2016 (IBC)
5. The NITI Aayog (Hindi for Policy Commission), also National Institution
for Transforming India,
 6. FDI
7. Financial Inclusion schemes such as PMJDY, Ayushman Bharat
8. Benami Transactions (Prohibition) Amended Act, 2016
9. Make in India, Start up India and Stand up India

Good and Service Tax (GST)

The tax came into effect from July 1, 2017 through the implementation of 101 st
Amendment of the Constitution of India by the Indian government. replacing
existing multiple flowing taxes levied by the central and state governments. The
role of Government in building a national consensus and introducing a bill to
amend the constitution to implement the Goods and Services Tax (GST) is notable.
The legislation was approved by the Rajya Sabha with 203 votes in favour and
none against, in the 243-member House. The bill was passed after a after a seven-
hour debate.
The main objective of the GST is to eliminate excessive taxation. GST is a uniform
indirect tax levied on goods and services across a country. Many developed nations
tax the manufacture, sale and consumption of goods using a single, comprehensive
tax mechanism. The rates of taxes have been 0%, 5%, 12%,18% and 28%. 32%
However, Petroleum products, alcoholic drinks, electricity, are not taxed under
GST and instead are taxed separately by the individual state governments, as per
the previous tax regime. There is a special rate of 0.25% on rough precious and
semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on
top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco
products. Pre-GST, the statutory tax rate for most goods was about 26.5%, Post-
GST, most goods are in the 18% tax range.
Demonetisation of ₹500, ₹1000: November 8, 2016
Though it came out as a surprise, not the pleasant one, but Prime Minister
Narendra Modi's demonetization announcement on November 8, 2016 took the
entire country by plethora of economic reforms. The objective was to curb black
money, bring in cash into the banking system to the greatest possible extent, put an
end to fake currency and plug all funding that could be used for terrorism.
On one hand where, the govt instructed people that whatever money they have in
₹500 and ₹1,000 denomination notes should be deposited into their bank accounts,
on the other hand Finance Minister Arun Jaitley ensured that demonetization will
in no way create any form of immunity.
It served multiple purposes. Cash holding, black money started getting noticed. If
anyone depositted undisclosed money in banks, the Income Tax Department had
taken action against him/her. With the I-T department keeping an eye on
suspicious transactions, the person involved could be slapped with 30 per cent tax
and a huge penalty.
Any person making transactions above ₹10 lakh in a year into any savings bank
account might get issued a notice from the I-T Department. 

The Real Estate (Regulation and Development) Act, 2016 is an Act of the
Parliament of India seeking to protect home-buyers as well as help boost
investments in the real estate industry by prohibiting unaccounted money from
being pumped into the sector. It also states that 70 per cent of the money has to be
deposited in bank accounts through cheques is now compulsory. The Act
establishes Real Estate Regulatory Authority (RERA) in each state for regulation
of the real estate sector and also acts as an adjudicating body for speedy dispute
redressal. The Act came into force on 1 May 2016 with 59 of 92 sections notified.
Remaining provisions came into force on 1 May 2017.

The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of
India is a single law for insolvency and bankruptcy. The bankruptcy code is a
strong insolvency framework where the cost and the time incurred is minimised in
attaining liquidation working as a one stop solution for resolving insolvencies
Insolvency , in India, is a long process and does not offer an economically viable
arrangement. The code targets to protect the interests of small investors and make
the process of doing business a less cumbersome process.

The NITI Aayog (Hindi for Policy Commission), also National Institution for
Transforming India, established in 2015, by the NDA government, to replace the
Planning Commission which followed a top-down model , is a policy think tank of
the Government of India. It was established with the aim to achieve Sustainable
Development Goals and to enhance cooperative federalism by fostering the
involvement of State Governments of India in the economic policy-making process
using a bottom-up approach. Its initiatives include "15 year road map", "7-year
vision, strategy and action plan", AMRUT, Digital India, Atal Innovation Mission,
Medical Education Reform, agriculture reforms (Model Land Leasing Law,
Reforms of the Agricultural Produce Marketing Committee Act, Agricultural
Marketing and Farmer Friendly Reforms Index for ranking states), Indices
Measuring States’ Performance in Health, Education and Water Management, Sub-
Group of Chief Ministers on Rationalization of Centrally Sponsored Schemes,
Sub-Group of Chief Ministers on Swachh Bharat Abhiyan, Sub-Group of Chief
Ministers on Skill Development, Task Forces on Agriculture and op of Poverty,
and Transforming India Lecture Series.

FDI in several sectors: 2015-Till date

From the beginning of 2015, the government announced fresh liberalisation of FDI
rules opening the gates of investment in food retail, airlines, private security firms,
and defence companies to higher overseas investment.
Other sectors in which FDI norms have been relaxed include e-commerce in food
products, broadcasting carriage services, private security agencies and animal
husbandry.
Here's a look at the changes in FDI:
- Up to 100% FDI in defence sector
- Up to 74% FDI in brownfield pharmaceuticals under automatic route
- 100% FDI in brownfield airport projects under automatic route
- 100% FDI in civil aviation
- FDI up to 49% in civil aviation under automatic route, beyond 49% through govt
approval
- Local sourcing norms for FDI in single brand retail for products having "state of
art" and "cutting edge" technologies
- 100% FDI under automatic route for cable networks, DTH and mobile TV
Foreign investment is considered crucial for India, which needs around $1 trillion
for overhauling its infrastructure sector such as ports, airports and highways to
boost growth. A strong inflow of foreign investments will help improve the
country's balance of payments situation and strengthen the rupee value against
other global currencies, especially the US dollar. 

Unleashing an era of financial inclusion, providing

 - Pradhan Mantri Jan Dhan Yojana where over 10 crore accounts of the
weaker sections have been opened. The DBT cash benefits will be
transferred to this account. Account holders have an accidental, LIC
policy and overdraft facility.
- Ayushman Bharat Yojana or Pradhan Mantri Jan Arogya Yojana
(PMJAY) or National Health Protection Scheme or ModiCare a
centrally sponsored scheme launched in 2018, under the Ayushman
Bharat Mission of MoHFW in India aims at making interventions in
primary, secondary and tertiary care systems, covering both
preventive and promotive health, to address healthcare holistically. It
is an umbrella of two major health initiatives namely, Health and
Wellness centres and National Health Protection Scheme (NHPS
- Moderating inflation and particularly inflation in agricultural items.
Replacing the model of cooking gas subsidy to direct transfer so
deserving consumers get benefit and leakages in subsidy are plugged
to the benefit of the exchequer. 

Black Money Bill: May, 2015

The government announced a separate Benami Bill to deal with domestic
black money as well as money stashed abroad. The bill provides for rigorous
imprisonment of up to 10 years for offenders.

Black Money (Undisclosed Foreign Income and Assets) and Imposition

of Tax Act, 2015: An Act to make provisions to deal with the problem of
the Black money that is undisclosed foreign income and assets, the
procedure for dealing with such income and assets and to provide for
imposition of tax on any undisclosed foreign income and asset held outside
India and for matters connected therewith or incidental thereto.
Black Money (Undisclosed Foreign Income and Assets) and Imposition
of Tax Act, 2015 aims to curb black money, or undisclosed foreign assets
and income and imposes tax and penalty on such income. The Act came
into effect from 1 July 2015.

Earlier, piloting the Undisclosed Foreign Income and Assets (Imposition of

Tax) Bill, 2015, Finance Minister Arun Jaitley said there would be short
compliance window for persons having undisclosed income abroad to come
clean by paying 30 per cent tax and 30 per cent penalty.
 Once the compliance window closes, anyone found having undeclared
overseas wealth would be required to pay 30 per cent tax, 90 per cent
penalty and face criminal prosecution.
Launching flagship programmes such as Swachch Bharat Abhiyan, Digital India
and Skilled India so that the real image and potential of India is explored.

The government has also added feather to tourism industry by introducing e-visa.
Various measures for trade facilitation by allowing 24 X 7 custom clearance on 17
airports and 18 seaports. Despite major reforms steps taken, there are still
challenges which economy faces. 

Investment needs to be enhanced and encouraged. Infrastructural spending has to

be stepped up. Manufacturing sector has to be given a major push. This has to be
done through encouraging public and private investment. This is our resolve for the
upcoming year. 

The economic ecosystem of India has undergone extreme overhaul at all levels
since the time it gained Independence on August 15, 1947.
To conclude following are some of the Economic reforms that made Indians
happy

1. Formation of Special investigation Team(SIT) on black money(under Justice

MB Shah) in its first Cabinet meeting
2. Implementation of Pradhan Mantri Jan Dhan Yojana from 15th august, 2014
for financial inclusion
3. Undisclosed foreign Income and Assets (Imposition of Tax) act, 2015
replacing the Income tax (IT) Act, 1961 to punish the persons for hiding of
foreign income
4. Amendment of Prevention of Money laundering Act, 2002 in 2015
5. Amendment of FEMA, 1999 act through Finance Act, 2015 to curb illegally
acquiring any foreign exchange or immovable property abroad.
6. Demonetization to curb illegal and unaccounted money on 8 Nov. 2016
7. Benami Transactions (Prohibition) Amended Act, 2016 replacing Benami
Transactions (Prohibition) Act, 1988
8. Make in India, Start up India and Stand up India for more growth and
development of economy through employment generation
9. Implementation GST country wide to redistribute the tax burden equally on
manufacturer and service holder.
Along with all these several steps have taken to develop economic infrastructure
development like

1. Smart Cities mission, 2015

2. AMRUT Yojana, 2015
3. Shyam Prasad Mukherjee National RURBAN Mission, 2016
4. Setu Bharatam Project
5. Sagarmala Project
6. National Civil aviation Policy, 2016

Due to all these initiatives the growth rate has been increased from 4.5% in 2012-
13 to 7.3% and 7.6% in 2014-15 and 2015-16 respectively.

According to economic survey India receiving one of largest FDI and India is
declared as one of the largest growing economies surpassing China as per WEO
report, 2017.

With all these reforms and advancements, I must agree with the statement that
“India is on the path to long term prosperity because of the introduction of
structural reforms in post 2014 period.”

Source:
1. https://iasinsights.com/2017/11/18/economic-reforms-in-india-post-2014/

2. https://www.timesnownews.com/india/article/8-big-indian-economic-reforms-that-changed-status-quo/51923

3. https://economictimes.indiatimes.com/news/economy/policy/2014-has-been-the-year-of-challenges-and-reforms-for-
india-arun-jaitley/articleshow/45722232.cms

4. Wikipedia.com