India Market Watch: Government to Launch Start-up Initiatives, Expects Increased FDI in 2016

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Government  Set to Launch Start-Up India, Stand-Up Initiative 

The Prime Minister in his monthly radio broadcast said that The Start-Up India, Stand-Up India mission will commence on January 16. The government is now in the process of finalizing a clear-cut plan for the Start-Up India mission. An inter-ministerial panel will be set up to evaluate proposals from entrepreneurs regarding their qualification for incentives and the merit of their ideas. Headed by the Department of Industrial Policy and Promotion (DIPP), the inter-ministerial body will meet fortnightly and will include the secretaries of the departments of information technology and biotechnology, among others. The objective is to cut down on regulations required to start a business, facilitate faster permits, expand financing options and provide tax breaks.

The Start-Up India mission, first announced during the August 15 Independence Day address of the PM, has so far sought to provide subsidy of US$6.04 billion (Rs 40,000 crore) through various direct benefit transfer schemes. It has been frequently highlighted in the recent past as the government believes it will generate mass employment and boost income levels that will further facilitate economic growth.

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Government reforms set to increase FDI Inflows in 2016

India expects foreign direct investment (FDI) to register a 40-45 percent increase in 2016. According to the latest available figures for 2015, FDI inflows into India amounted to US$26.51 billion at an increase of 18 percent – from January to September 2015. In 2014 India received FDI worth US$28.78 billion, and in 2013 it was US$22 billion. Top sectors that attracted FDI in 2015 include services, computer hardware and software, telecom, automobile and trading.

To improve the investment climate, the government streamlined FDI structures in 2015. It introduced a composite foreign investment cap (clubbing all categories of overseas investments), hiked the investment cap across several sectors, relaxed e-commerce norms for foreign companies that have manufacturing bases in India, and opened up new sectors such as banking, palm, coffee and rubber plantations for FDI. Sourcing rules for single brand retailers were made easier, but the 51 percent ownership limits of FDI in the multi-brand retail sector remained.

FDI reforms are crucial to the government’s plans, as India requires US$1 trillion worth of investments during the 12th Five Year Plan (2012-2013 to 2016-2017) for infrastructural growth and development (ports, airports and highways).

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Firms Construct Production Facilities in a Boost to Make In India Campaign

In a boost to the government’s Make in India campaign, several companies have started manufacturing their products in the country. Most recently, mobile phone manufacturer, Vivo Mobile India, commenced manufacturing smartphones in Greater Noida, Uttar Pradesh state. All smartphones will be manufactured at the new facility and will cater to the domestic market. Another example is U.S. based Amway, which opened its first manufacturing facility in India. The plant is located in Dindigul district in Tamil Nadu state. Amway’s other non-US plants are located in China and Vietnam. The firm’s India operation will make India-specific products, while state of the art R&D laboratory is also being explored at the manufacturing facility.

The government has stated that since the launch of the ‘Make in India’ campaign, FDI has increased by about 35 percent. Several companies including Foxconn, Zenith, Ikea and Wanda group are investing in the country. The government will also host a Make in India Week from 13-18 February and expects around 1,000 companies from 60 countries to participate.

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