India Market Watch: New Capital Goods Policy Approved and Digital Literacy Initiatives Launched by Intel India
Government Approves New Capital Goods Policy
The Union cabinet has approved the first ever national capital goods policy that was announced by the government earlier this year. The goal is to incentivize the domestic production of manufacturing equipment and subsequently increase their exports. Altogether, the capital goods policy hopes to increase India’s production of capital goods from US$ 34.34 billion (Rs 2.3 lakh crore) to US$ 111.99 billion (Rs 7.5 lakh crore) and create 30 million jobs by 2025.
Specific areas of intervention are identified by the new policy – improving the technology depth across the capital goods sub-sectors, skill development and enhancement, ensuring mandatory standards, and promoting the growth and capacity building of micro, small, and medium enterprises (MSMEs).
The Department of Heavy Industry is expected to secure approvals for schemes to roll out key aspects of the policy. India is currently a net importer of capital goods – domestic production contracted by 2.9 percent in 2015-2016 as per the Index of Industrial Production (IIP) while import of industrial machinery rose 5.2 percent to US$ 9.7 billion and that of electrical machinery and equipment was flat at US$ 6 billion. The indigenous development of this sector will, therefore, be integral to the success of the ‘Make in India’ program spearheaded by Prime Minister Modi’s government.
Intel India Introduces New Initiatives to Support ‘Digital India’ Program
Intel India recently launched three projects that support the government’s Digital India program. The new initiatives are designed to accelerate digital literacy at the rural grassroots level, up-skill citizens in semi-urban cities and beyond, and encourage innovation from the local level.
The first project was the “Ek Kadam Unnati Ki Aur” initiative to accelerate access to technology in rural India that is now followed by the e-launch of “Unnati Kendra at Common Service Centre” (UK at CSC) in Karnal, the first in Haryana. The ‘UK at CSC’ will seek to expand Intel India’s common access digital learning centers across 10 states this year; 10 such facilities are already set up in the southern state of Telangana. Intel India has also set up the “Digital Unnati” website in collaboration with the CSC e-Governance Services India Ltd. This website aims to educate Village Level Entrepreneurs (VLEs) with the know-how to assemble a personal computer and add to their technology skill set online. The technology company is also preparing for the second chapter of the Intel and DST – Innovate for Digital India Challenge for later in the year. The challenge is a nationwide competition that seeks to create innovative technology solutions that solve real problems faced by citizens.
Forex Reserves Increase in FY 2015-2016
India’s total foreign exchange reserves were up by US$ 18 billion in the financial year 2015-2016, over the previous year’s levels, reaching US$ 360 billion by March end. The forex reserves also account for non-dollar currencies and their revaluation impact against the US dollar.
However, this rise in reserves is not steep, especially given the record foreign direct investment (FDI) inflows of US$ 55 billion in the 2015-2016 financial year. Experts explain that this is due to the Reserve Bank of India’s (RBI) efforts to utilize the forex reserves as a buffer to stem the Rupee’s volatility owing to falling crude oil and commodity prices as well as the ongoing economic slowdown in China. When the Rupee reached record lows in September 2013, the RBI reintroduced the Foreign Currency Non-Resident (FCNR (B)) scheme to raise US$ 25 billion to stabilize the rupee. The FCNR (B) scheme matures this September, following which RBI Governor Raghuram Rajan is confident it will not result in “any acute pressure on the domestic markets”.
In this issue of India Briefing Magazine, we spotlight three issues that financial management teams for India should monitor. Firstly, we examine the new Indian Accounting Standards (Ind-AS) system, which is expected to be a boon for foreign companies in India. We then highlight common filing dates for most companies with operations in India, and lastly examine procedures and regulations for remitting profits from India.
Taking Advantage of India’s FDI Reforms
In this edition of India Briefing Magazine, we explore important amendments to India’s foreign investment policy and outline various options for business establishment, including the creation of wholly owned subsidiaries in sectors that permit 100 percent foreign direct investment. We additionally explore several taxes that apply to wholly owned subsidiary companies, and provide an outlook for what investors can expect to see in India this year.
An Introduction to Doing Business in India 2015 (Second Edition)
Doing Business in India 2015 is designed to introduce the fundamentals of investing in India. As such, this comprehensive guide is ideal not only for businesses looking to enter the Indian market, but also for companies who already have a presence here and want to keep up-to-date with the most recent and relevant policy changes. We discuss a range of pertinent issues for foreign businesses, including India’s most recent FDI caps and restrictions, the key taxes applicable to foreign companies, how to conduct a successful audit, and the procedures for obtaining an employment visa.
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