Model Answer
0 min readIntroduction
India has long strived to attract both domestic and foreign investment to fuel economic growth and create employment opportunities. Historically, a complex regulatory environment and infrastructural bottlenecks hindered this progress. Recognizing this, the Government of India has undertaken significant reforms in recent years to facilitate investment and improve the ‘Ease of Doing Business’. The World Bank’s Doing Business report (discontinued in 2021) had shown substantial improvement in India’s ranking, from 142 in 2014 to 63 in 2019, reflecting the impact of these initiatives. This answer will comprehensively examine these new initiatives, their impact, and the remaining challenges.
Regulatory Simplification and Reforms
A major thrust of the government’s efforts has been to simplify regulations and reduce the compliance burden for businesses.
- Goods and Services Tax (GST) – 2017: This landmark indirect tax reform replaced a multitude of central and state taxes with a single, unified tax regime, streamlining the tax structure and reducing cascading effects.
- Insolvency and Bankruptcy Code (IBC) – 2016: The IBC provides a time-bound process for resolving insolvency, improving credit availability and reducing the burden of Non-Performing Assets (NPAs) on banks.
- Decriminalization of minor offences – 2020: Amendments to various laws decriminalized minor offences, reducing the fear of prosecution and encouraging entrepreneurship.
- National Single Window System (NSWS) – 2021: A portal to provide a single point of contact for investors and businesses to obtain all necessary approvals and licenses.
Infrastructure Development
Recognizing infrastructure as a key driver of economic growth, the government has significantly increased investment in this sector.
- Bharatmala Pariyojana – 2017: A massive highway development project aimed at improving connectivity across the country.
- Sagarmala Project – 2015: Focuses on port modernization, connectivity enhancement, and coastal economic zones.
- Dedicated Freight Corridors (DFC): Construction of dedicated railway lines for freight transport to reduce congestion and improve efficiency. The Eastern and Western DFCs are key components.
- PM Gati Shakti National Master Plan – 2021: An integrated infrastructure development initiative aimed at reducing logistics costs and improving connectivity.
Financial Sector Reforms
Reforms in the financial sector have aimed to improve credit availability and strengthen the banking system.
- Jan Dhan Yojana – 2014: Financial inclusion scheme providing access to banking services for all citizens.
- Pradhan Mantri Mudra Yojana – 2015: Provides loans to micro and small enterprises.
- Strengthening of the Banking Regulation Act: Amendments to enhance the regulatory powers of the Reserve Bank of India (RBI).
- Capital Infusion in Public Sector Banks: Government has recapitalized PSBs to improve their financial health and lending capacity.
Investor Facilitation and Promotion
The government has actively sought to attract foreign investment through various initiatives.
- ‘Make in India’ – 2014: A flagship initiative to encourage domestic manufacturing and attract foreign investment in key sectors.
- ‘Startup India’ – 2016: Promotes entrepreneurship and innovation by providing support to startups.
- Production Linked Incentive (PLI) Scheme – 2020: Offers financial incentives to companies for increasing domestic production in strategic sectors. Sectors include electronics, pharmaceuticals, automobiles, and textiles.
- Foreign Direct Investment (FDI) Policy Liberalization: Relaxing FDI norms in various sectors to attract more foreign investment.
Recent Initiatives (Post 2022)
- PM-SHRI Scheme (2022): Upgrading schools to provide a modern learning environment, indirectly boosting human capital and attracting investment.
- National Logistics Policy (2022): Aims to reduce logistics costs and improve efficiency through integrated infrastructure and technology.
| Initiative | Year | Key Impact |
|---|---|---|
| GST | 2017 | Simplified tax regime, reduced cascading effects |
| IBC | 2016 | Faster resolution of insolvency, improved credit availability |
| PLI Scheme | 2020 | Boost to domestic manufacturing, increased investment in strategic sectors |
| National Logistics Policy | 2022 | Reduced logistics costs, improved efficiency |
Conclusion
The government has implemented a series of impactful initiatives to facilitate investment and improve the ease of doing business in India. These reforms have led to significant improvements in India’s economic environment, attracting both domestic and foreign investment. However, challenges remain, including the need for further simplification of regulations, improvement in infrastructure quality, and addressing land acquisition issues. Continued focus on these areas, along with effective implementation of existing policies, will be crucial for sustaining the momentum and realizing India’s full economic potential.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.