The U.S.-India Business Council welcomed India's 2013 budget as fundamentally sound. Citing steps being taken by Finance Minister Chidambaram to consolidate India's fiscal position, USIBC gave high marks to the Union Finance Minister, who distinguished himself earlier as one of the original architects of India's economic liberalization.
Union Finance Minister Chidambaram is recently credited with an important redirection of investment-generating priorities, starting with legislative approval opening India’s vast retail sector to organized players, and allowing foreign investment in domestic airlines and electric power trading.
"The government of India recognizes that a growth rate of 5 percent will not run its economic engine fast enough to create the jobs necessary to put India's young population to work," said USIBC President Ron Somers. "The present threat of slowing growth is not dissimilar to that experienced during the financial crisis 20 years ago that prompted India's economic opening. This government well remembers the under-employment so rampant at that time, and in this 2013 budget, the Finance Minister has taken some corrective teps necessary to revitalize investor enthusiasm, spur growth, and tame government spending.”
For India’s budget 2013, USIBC applauded the government's plan to accelerate public sector divestment – a move that will stimulate greater efficiencies and productivity. USIBC repeated its call for increased liberalization in the insurance, pensions, defense, and retail sectors – actions that will attract capital and technology to India. And, rather than the government resorting to out-dated “command-control” policies or mandates to require companies to manufacture locally, USIBC continues to press for market-based incentives for India to realize its manufacturing goals.
USIBC reiterated its commitment to support India in its $1 trillion dollar build-out of infrastructure, which will generate jobs and opportunities for both Indian and American companies. In this, the private sector must play a leading role. To mobilize the funds necessary for India to meet these mammoth targets, USIBC applauded India’s important expansion of the capital markets, including increased debt limits for infra tax-free bonds and allowance of FIIs for the first time to trade in foreign exchange. Recognizing India’s aspiration to achieve greater energy security, USIBC applauded the government’s persistence in continuing to bring fuel prices in line with market rates, which will spur investment in exploration and energy infrastructure.
On the tax front, USIBC welcomed the clarity now emerging by India’s adoption of the Shome Committee recommendations, which stipulate clear guidelines defining legitimate tax planning for domestic and foreign investors. More broadly, USIBC emphasized that while policy direction on foreign company taxation is important, the real litmus test for investors will be how such taxes are enforced and collected in a fair, consistent manner.