While strong words make good speeches, the BJP-led Government has to go beyond rhetoric and focus on real issues such as a stable policy regime, flexible labour laws, less paper-work, a pragmatic land acquisition policy and lower corruption to make the country an attractive destination for investors.
During its 10-year reign, the UPA Government failed to lure foreign investors in a big way as it did not succeed in most of the above mentioned areas, although it did try to come up with attractive policies from time to time.The SEZ quagmire
The Special Economic Zones (SEZ), which delivered results for some time, stopped attracting investments as soon as the UPA Government decided to tinker with the established policy by introducing Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT).
Investors, who had already invested in the zones, felt that it was a breach of trust as they had already put in their money based on calculations made with a tax-free regime in mind.
The UPA was also not successful in introducing labour law flexibilities in the zones as it could not take the States on board.
During its second stint, the UPA’s Commerce & Industry Minister Anand Sharma decided to ignore SEZs and instead focussed his attention on New Manufacturing and Investment Zones (NMIZs) which failed to take off.
With the BJP Government now planning smart cities and investment zones, it has to ensure that it carries out its negotiations with the Labour Ministry and the State Governments judiciously. The Government has to see that the legitimate demands of the industry to bring about changes in labour laws in tune with the demands of the present times are met.
Moreover, the incentives it gives to investors have to be continued over a given period of time. Fast decision on a land acquisition policy is also imperative as availability of land is one of the biggest concern for investors.
A balanced policy that would ensure that land owners get a good deal, while industry, too, gets land wherever available without much hassle will be a challenge for the BJP.Crack down on corruption
There has to be a crackdown on corruption as well that has seeped into all layers of the establishment. It is well known that in the previous regime, a big telecom company almost withdrew from a SEZ in Tamil Nadu as a Minister delayed clearing its proposal because the company refused to grant him a favour.
Prime Minister Narendra Modi has to ensure that corruption at the top most level, at least, has to stop, if the country is to be taken seriously by foreign investors.
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