India tough place for business: US report

Source: TOI

What is the News?

The US State Department has released a report titled ‘2021 Investment Climate Statements: India’.

Key Findings of the Report: India remains a challenging place to do business despite taking up many reforms and improving its position in the ease of doing business index. This is because:

• Protectionist Measures: New protectionist measures including increased tariffs, procurement rules that limit competitive choices, sanitary and phytosanitary measures restrict the expansion in bilateral trade.
• FDI Rule for Aviation: Under FDI rules for aviation, 100% overseas flows have been permitted. But the substantial ownership and effective control (SOEC) rules that mandate majority control by Indian nationals have not been clarified yet.
• FDI Rule for Insurance Sector: The report was also critical of discriminatory FDI policy for the insurance sector where the FDI ceiling has been increased to 74% but with the Indian management and control rider.
• Data Localisation Norms: RBI’s order on storing data on payment transactions within the country has led to significant compliance costs and increased risk of cybersecurity vulnerabilities.
• Equalisation Levy: US had threatened retaliatory action over the equalisation levy on US tech companies.
• Political Risk: The report also referred to the removal of the special constitutional status from the state of Jammu and Kashmir (J&K) and the passage of the Citizenship Amendment Act (CAA).

Way Forward:

• The report has urged India to foster an attractive and reliable investment climate by reducing barriers to investment and minimising the bureaucratic hurdles.