India continues to be a challenging place to do business, the United States said in a report released on Wednesday. The country’s State Department, in its “2021 Investment Climate Statements” report, has urged the Narendra Modi-led government to reduce bureaucratic hurdles for investment in the country.
“New protectionist measures, including increased tariffs, procurement rules that limit competitive choices, sanitary and phytosanitary measures not based on science, and Indian-specific standards not aligned with international standards, effectively closed off producers from global supply chains and restricted the expansion in bilateral trade,” the report said.
The report comes a month after the government announced its new e-commerce rules on June 21. Among other things, the rules make it mandatory for e-commerce companies operating in India needs to register with the Department for Promotion of Industry and Internal Trade.
Government departments have expressed reservations that the new rules could hurt investor sentiments. “The moment you ask someone to register, which is what has been suggested, you ask them [companies] to queue up and start a bureaucratic process,” an unidentified official told The Times of India after the rules were announced.
In its report, the US State Department also mentioned the political environment in India. It said the National Democratic Alliance government’s first 100 days of its second term were marked by two “controversial” decisions.
This includes the Centre revoking the special status of Jammu and Kashmir – legally coded as Article 370 of the Indian Constitution – under which it had acceded to the Indian Union. The other was the passage of the Citizenship Amendment Act, which introduces religious criteria by allowing undocumented non-Muslim migrants from Afghanistan, Pakistan and Bangladesh to apply for Indian citizenship.
“Protests followed the enactment of the CAA but ended with the onset of Covid-19 in March 2020 and the imposition of a strict national lockdown,” the report added. “The BJP-led government has faced some criticism for its response to the recent surge in Covid-19 cases.”
However, the Indian government “continued to actively court foreign investment” in the wake of the pandemic, the report said.
It also said the three new farm laws should help the country get private and foreign direct investment, even as thousands of farmers have been camping outside Delhi since November for repeal of the legislations. The report also appreciated Finance Minister Nirmala Sitharaman’s Budget announcements on disinvestment and raising the FDI limit in the insurance sector.
In her Budget speech in February, Sitharaman allowed up to 74% FDI in the insurance sector, up from the previous limit of 49%. She also set a target of raising Rs 1.75 lakh crore from disinvestment of government assets.