By Tracie Frost
India recently released a new national intellectual property rights policy which seeks to enhance Prime Minister Narendra Modi’s Make in India scheme by boosting innovation. The policy, which comes at an important time for U.S.-India relations, has been widely criticized in the Indian press.
India currently ranks 37 out of 38 countries in the United States Chamber of Commerce (USCC) Global Intellectual Property Chamber Index. Based on 30 indicators spread across six categories – patents, copyrights, trademarks, trade secrets, enforcement, and international treaties – the index gives India an abysmal score of 7.05 out of 30 possible points. The greatest concern for the USCC is an Indian rule prohibiting patents for incremental changes and India’s use of compulsory licensing provisions as a means of effectuating technology transfer. Also noted as areas of concern were a series of court rulings regarding copyright infringements, deficiency of regulations for data protection, and poor enforcement of civil and criminal remedies.
Government Considers Longer Highway Contracts to Attract Investors
The government will consider extending the tenure of contract for operation and maintenance (O&M) of highways, from the current nine years to 29 years. This includes both fresh contracts and projects where the contractor is the National Highways Authority of India (NHAI). The extended stipulated period will ease recovery of costs and boost profit margins, after which the projects will be handed over to the government. Sources placed in the government state that the Union Ministry of Road Transport and Highways and NHAI are already working together to come up with more incentives to attract foreign investors to India’s infrastructure sector.
By Siddhartha Thyagarajan & Kabir Narang
The Indian government’s attempts to ease doing business currently seem one-sided. Facilitating market entry and tearing down barriers to production and trade are just one side of the coin. The other involves allowing defunct, unhealthy firms to seamlessly exit the market, where they can easily liquidate their assets.
The current financial scenario in India makes this all the more important. Most companies and major banks’ balance sheets are riddled with NPAs (Non-Performing Assets). Bad lending practices, natural disasters, and poor credit policies also contribute to the rising number of NPAs. Due to these NPAs, mostly comprising of faulty loans and overdue debt obligations, banks become starved of incoming cash flows and therefore have to compensate by charging extremely high interest rates on some products. Bank shareholders are also adversely affected. NPAs have a profound effect on the financial scenario in an economy and are often responsible for causing liquidity crunches for major financial institutions. This in turn has a destabilizing effect on the economy.
e-Commerce in Asia, the latest publication from Dezan Shira & Associates, is out now and available for complimentary download through the Asia Briefing Publication Store.
In this report:
- Step-by-Step Guide to Establishing an e-Commerce Presence in Asia
- China, Vietnam, and India e-Commerce Market Summaries
- Investing in China, Vietnam, and India’s e-Commerce Markets
As the digital revolution transforms shopping habits worldwide, emerging markets in Asia stand out as enormous opportunities for foreign investment. Rising internet penetration, a growing consumer base, and rapidly developing logistics infrastructure contribute to burgeoning e-commerce activity in all three of China, Vietnam, and India.
China’s e-commerce market is already the world’s largest, with established online shopping giants catering to the varied needs of increasingly discerning consumers who value the quality and trustworthiness of foreign products. The e-commerce industry in Vietnam is comparatively green, though improving infrastructure and connectivity present opportunities not just for sellers but also ambitious companies seeking to capitalize on the fractured nature of the country’s online retail industry. India is somewhere in between, boasting rapidly growing internet penetration and a massive potential consumption class as investors benefit from the recent relaxation of previously unclear and restrictive government regulations.
By Tracie Frost
Last year we reported favorably on reinsurance rules codified in the Insurance Laws Amendment Act 2015. At the time, the amendments to foreign direct investment (FDI) caps for reinsurance were considered to be one of the most significant provisions of the new law. While the Insurance Laws Amendment Act 2015 capped FDI for life and most non-life insurance companies at 49 percent, it allowed foreign re-insurers to open branch offices in India. In other words, under the law, foreign re-insurers could legally do insurance business in India without a joint Indian partner for the first time. However, when the Insurance Regulatory and Development Authority of India (IRDAI) notified regulations under the new law, the reinsurance industry was surprised by the result.
The Insurance Regulatory and Development Authority of India first notified regulations under the new law in April 2015. Those regulations provided guidance on minimum capital requirements, profit repatriation, ownership structure, etc. Unfortunately, they also gave preference to state-owned GIC Re, India’s only domestic reinsurer, and the holder of 52 percent of the Indian reinsurance market share. In effect, the regulations would have required that domestic insurance companies give GIC Re the right of first refusal on new reinsurance business. In response to backlash from foreign insurers, IRDAI rewrote the rules putting GIC Re on a level playing field in May 2015. Those rules were vetoed by the joint secretary of the finance ministry in October 2015, and IRDAI again drafted rules giving GIC preference for Indian reinsurance business which were notified in early 2016.
By Siddhartha Thyagarajan & Kabir Narang
The original blueprint of the Goods and Services Tax (GST) bill was first introduced in 2001. It aims to adopt a value added tax (VAT) model, and replace the current national-level central excise duty and state-level sales tax model. Heated debates in parliament has hindered the passage of the bill, which has been modified several times.
India’s current tax system is complex and multi-layered. Cross-border compliance, compounding of taxes on domestically produced goods and services, in addition to several central and state taxes, exacerbate the complexity of the system. This is why the government has realized the need for an efficient, transparent, and simple method of indirect taxation in the form of the GST bill. The bill indicates that the GST will be a tax on the final consumption or the actual supply of goods and services. The basic provision of the tax is that economic activity at each stage of production is taxed at the same rate, preventing further fragmentation. The GST will comprise of three main taxes: CGST (Central), SGST (State), and IGST (Inter-State). This article critically evaluates the bill. The first section looks at the benefits of the GST, the second section addresses the drawbacks of the GST, and the final section looks at how the GST will affect the landscape of the Indian economy.
An Introduction to Doing Business in India 2016, the latest publication from Dezan Shira & Associates, is out now and available to subscribers as a complimentary download in the Asia Briefing Bookstore.
By Dezan Shira & Associates
Editor: Tracie Frost
The Ministry of Human Resources Development (MHRD) of the Government of India recently announced its intent to establish a new National Education Policy (NEP). The current policy has been unchanged since 1992. MHRD’s document, “Some Inputs for Draft National Education Policy 2016,” is open for public comment until July 31, 2016. The higher education aspects of the policy are of particular interest to foreign educational institutions.
According to a report written for MHRD, nearly 300,000 Indian students study abroad, mostly in post-graduate and doctorate programs, spending about US$ 9 billion per year. Nearly half of those 300,000 students go to the United States, with the United Kingdom and Australia accounting for most of the other destinations for studying abroad. Annual spending by Indians for foreign studies is twice the amount allocated in the central government budget for higher education, and nearly 20 times what Indian higher education institutions spend on research collectively. In contrast, only 75,000 foreign students come to India, many only for short duration study programs; less than 20,000 international students are enrolled in degree programs, most of them undergraduate students from South Asia.