India is now top 10 destinations for FDI, Make in India to make big difference

Automotive industry may be key to make India world leader, says UN report

GN Bureau | June 25, 2015


#fdi   #india   #foreign direct investment   #china   #us  

For the first time India is one of the top 10 destinations for foreign direct investment (FDI). While acknowledging India’s climb, the United Nations Conference on Trade and Development (Unctad)'s World Investment Report of 2015 appreciates India’s reforms in tax regime.

At number nine position the FDI inflow into India was $34 billion in 2014, up 22% rise from $28 billion in 2013. In fact, Inflows into the country were 83.5% of South Asia's $41.2 billion. India was 15th on the list in 2013.

The Unctad report said India's FDI inflows would continue to rise in 2015 as an expected economic recovery gained ground. "In terms of structural composition, manufacturing is gaining strength, as policy efforts to revitalise the sector are sustained, including, for instance, the launch of the 'Make In India' initiative in mid-2014," the report said.

Under the 'Make In India' initiative, the Narendra Modi government has identified 25 industrial sectors in which India has the potential to be a world leader, including automotives, chemicals, pharmaceutical and textile industries, it said.

Among the top 10, China, Hong Kong and the US accounted for the biggest share. China was at the top spot with FDI of $129 billion in 2014 ($124 billion in 2013). The US share fell from $231 billion in 2013 to $92 billion in 2014. Hong Kong got $103 billion of FDI in 2014.

Others in the top 10 in 2014 were the UK (fourth), Singapore (fifth), Brazil (sixth), Canada (seventh), Australia (eighth) and the Netherlands (10th).

Driven by auto industry
The report said automotive industry, which India opened up to FDI in 1991, was a key part of the Indian economy and had been identified as a key sector in which India could become a world leader.

The country accounted for most of the new investment projects announced by global automobile makers and first-tier parts suppliers in South Asia during 2013 and 2014, including 12 projects above $100 million.

 "Investment from the growing automotive industry in India shows potentials of a positive 'spillover effect' to productive capacity building in South Asia as a whole," the Unctad report said.

Tax law reforms
The Unctad also supported India's plans to replace bilateral investment protection treaties with a new pact that seeks to plug gaps and enhance legal protection of foreign investors in India as well as Indian investments abroad.

"India made available its new draft model, the Bilateral Investment Treaty (BIT). The new model includes several innovative provisions," the report said.

Multinational enterprises employ a range of tax avoidance tools, many of which take advantage of investment structures in these hubs.

"Tax avoidance practices by multinational enterprises are a global problem because investments from offshore hubs are made in developing and developed countries alike," UNCTAD said.

Under the new model of BIT, investors who have substantial business activities in the home state would be protected by the treaty. The proposed BIT would remain in force for 10 years.

The model stipulates that investors must first submit their claim before relevant domestic courts or administrative bodies for the purpose of pursuing domestic remedies, wherever available.

After exhausting all judicial and administrative remedies, if a resolution of the problem remains elusive, the investor may commence proceedings under the investor-state dispute settlement (ISDS) article.

Loss of $100 billion
The report says that developing nations are witnessing annual tax revenue losses to the tune of $100 billion due to entities resorting to offshore hub-based tax avoidance practices.

"Tax avoidance practices are responsible for significant leakages. An estimated $100 billion annual tax revenue loss for developing countries is related to inward investment stocks directly linked to offshore investment hubs," said the Unctad's report.

"... the more investment is routed through offshore hubs, the less taxable profits accrue. On an average, across developing economies, every 10 percentage points of offshore investment is associated with a one percentage point lower rate of return."

Tax avoidance can be tackled while promoting investment in sustainable development, it stressed.

Full Report: click here

Comments

 

Other News

How the Great War of Mahabharata was actually a world war

Mahabharata: A World War By Gaurang Damani Sanganak Prakashan, 317 pages, Rs 300 Gaurang Damani, a Mumbai-based el

Budget expectations, from job creation to tax reforms…

With the return of the NDA to power in the recently concluded Lok Sabha elections, all eyes are now on finance minister Nirmala Sitharaman’s full budget for the FY 2024-25. The interim budget presented in February was a typical vote-on-accounts, allowing the outgoing government to manage expenses in

How to transform rural landscapes, design 5G intelligent villages

Futuristic technologies such as 5G are already here. While urban users are reaping their benefits, these technologies also have a potential to transform rural areas. How to unleash that potential is the question. That was the focus of a workshop – “Transforming Rural Landscape:

PM Modi visits Rosatom Pavilion at VDNKh in Moscow

Prime minister Narendra Modi, accompanied by president Vladimir Putin, visited the All Russian Exhibition Centre, VDNKh, in Moscow Tuesday. The two leaders toured the Rosatom Pavilion at VDNKh. The Rosatom pavilion, inaugurated in November 2023, is one of the largest exhibitions on the histo

Let us pledge to do what we can for environment: President

President Droupadi Murmu on Monday morning spent some time at the sea beach of the holy city of Puri, a day after participating in the annual Rath Yatra. Later she penned her thoughts about the experience of being in close commune with nature. In a message posted on X, she said:

PM leaves for Russia, Austria

All eyes are on the Narendra Modi-Vladimir Putin meeting, as the prime minister left Monday for an official visit of Russia as also of Austria. In the ‘departure statement, the PM said, “I am embarking on an official visit to the Russian Federation for the 22nd Annual Summit and

Visionary Talk: Amitabh Gupta, Pune Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook Twitter Google Plus Linkedin Subscribe Newsletter

Twitter