The current version of the Union Budget was created in the backdrop of a rising fiscal deficit, stress on the financial sector, and lower-than-normal GST revenue. The Finance Minister’s strategy had to be a mixture of reform ambition and fiscal prudence. In that respect the intentions of Budget 2020 are clear and unambiguous.

Despite the sizable challenge of growth hurdles, fiscal deficit has been limited to 3.8% in the last financial year. The target for FY 20-21 too, has been set at 3.5% regardless of the expenditure to be incurred on the infra and social sectors. These announcements boost morale for investors at a time when GDP growth has fallen to its lowest value in 27 weeks – 4.7% for the quarter ended December, 2019. As the year unfolds, the impact of the Budget can be better understood once market signals are actually realized and assessed.

The three industrial sectors that have been given emphasis in this Budget are: education, health and agriculture. It is known that these sectors impact a large percentage of India’s population.

Salient Budget Features that Encourage New Business in India:

  • The Agriculture sector encourages the State-level implementation of previously formulated model laws, such as the Model Agricultural Land Leasing Act, and the Model Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act, 2018. These statutes are aimed at simplifying the process of procuring farm produce and transporting them between states, thereby guaranteeing the best prices to local farmers and consumers. Similar programs have been set up to encourage marine fishery and farm storage facilities in each village.
  • Tier 1 and Tier 2 cities facing a lack of healthcare centers will see gap funding for hospital creation via PPP mode. Most areas already have health centers under the Central Government’s flagship health schemes. These will go a long way in improving workforce health indices and help build a stronger pool of talent.
  • In the education sector, FDI and foreign currency loans would now be allowed. Funding toward setting up truly world class institutions that produce a pool of qualified workmen, technicians, and innovators is the need of the hour. 
  • Investment processes are proposed to be made easier by setting up an Investment Clearance Cell for guiding investors through facilitation and beyond. Also in the pipeline are easing of procedures to obtain funds from International Financial Services Centers (IFSCs) to streamline capital availability for critical infrastructure projects.
  • Also suggested was a scheme to disburse higher export credits via higher insurance, reduced premium for small exporters and decongesting the claims and settlement process.
  • Five new smart cities are to be built through the PPP route. These smart cities will act as state-of-the-art offices, facilities and workplaces for modern day employees hired by global businesses.
  • Non-resident investors will soon be able to invest in specified government securities and hence encourage foreign exchange into India. Certain amendments to the factories act will make it possible for MSMEs to access hitherto restricted sources of invoice financing. Other financial products available on digital apps and debt specially made available to MSME entrepreneurs will also be made available to ensure steady working capital flows. 

Key policy declarations affecting manufacturing, infrastructure, logistics, power, corporate law, technology and finance for MSMEs have been put on the anvil.

It is clear that India has been continuously making efforts to make the business environment as friendly as possible for the foreign entity. India entry is easier than ever and opportunities continue to exist.

You may still find challenges when starting a business in India for the very first time. It is highly recommended that you team up with a local partner to safeguard against cost and time overruns. A reliable local partner such as Tecnova can help setup your Indian business entity. It will also register and ensure tax compliance, setup office space, hire local talent, and help you through market identification and strategy implementation.

With over 1500+ clients preferring to partner with Tecnova as their India consultant, this is your best bet to succeed in India. Get in touch with a Tecnova expert to discover opportunities today.

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