THE NEWSMAN OF INDIA.COM

It is competition that is likely to emerge between US and India over what incentives they can give businesses to lure them into setting up manufacturing base in respective country. Trump has already announced a tax rate of 15 % and has warned businesses of penalties if they set up business in India. Modi has not as yet announced any incentives under his Make in India initiative but the buzz is taxes on corporates are likely to be down to 25% instead of the current 35%. The point is will the manufacturers really find low tax rates incentive enough to set up their businesses in these countries ? Taxes are very low incentives for those who are manufacturing in different locations say business advisors who advise big businesses to choose locations for expansions. What really attracts manufacturers to choose certain location is cheap raw material costs, hassle free land acquisitions, cheap labour costs, proximity to markets, laws that are effective and have speedy resolution and a certainty of business environment to name a few. India has most of these ingredients and has been the favored location for automobile, mobile manufacturing ,and other businesses but the rush to set up business is as yet not in India either by domestic players or by foreigners. This is due to big disincentives- one the certainty of business environment is not there with the present dispensation it as yet does not enjoy the confidence of investors this despite rolling out a welcome mat. Two,there is a continued environment of tax terrorism that had been unleashed by UPA govt and continues in present government too. Local bureaucracy and larger tax laws both are threatening the businesses rather than shepherding it as if dodging taxes is the only incentive for businessmen. Three, there is no clarity on labour laws which are antiquated and still are in favor of labour unions despite giving incentives by manufacturers. The difference in the working of govt is not really felt by businesses on the ground as yet and hence it is not convinced enough to set up manufacturing in India or expansion by Indian businesses itself. It is high time the present dispensation in India studies what really was the right ingredient of policymaking, set of rules and laws that incentivised setting up of most manufacturing bases during the earlier government tenures and replicate them . Time for Modi government is running out and the people of this country will seek answers on how much employment has been generated from the 2 crore employment promise that Mr Modi had made during elections. Mere slogans like ‘Lets make America great’ or ‘Make in India’ don’t attract businesses,right environment is required certainly not penalties and tax terrorism.

Article by Bhagyashree Pande