- The Indian Union Government in the saddle has made no bones about its ambitions and aspirations to lead the economy to unprecedented levels making it to be counted amongst one of the most growth-oriented stories in the eyes of the global audience. The ruling dispensation touted in no uncertain terms its ambitious objectives of achieving a $5 trillion economy by 2024 on the back of a promising outlook before the universe was subjected to unfathomable hammering from the pandemic-induced devastation. It is a no-brainer to understand that the growth story of any economy is defined by several crucial parameters aided by sustained planning, strategy, perseverance, and resilience to a large extent.
- Further dissecting the objectives would lead us to look at micro levels dotting the investment scenario where provisioning of conducive atmosphere vis-à-vis attracting foreign direct investment by ensuring all the usual bottlenecks and the rampant long-winding procedural rigmarole does not come in the way of rolling out a red carpet for the interested business conglomerates/entrepreneurs to invest in the country. Ease of doing business is one compelling parameter that should take precedence over other hassles showcasing confidence-building measures for the potential investors to consider approaching the market.
- Make no mistake, the Indian market is monumental owing to its sheer size alone which could be explored profitably if the environment is made attractive by the authorities through concerted efforts to address/eradicate routine holdups. However, one of the most business-unfriendly decisions of the erstwhile UPA finance minister Late Pranab Mukherjee in 2012 keeps haunting the country for a considerable amount of time by way of retrospective amendment of a section of the Income-tax Act. Universally acknowledged as the master economic strategist and troubleshooter par excellence, Pranabda’s decision was perhaps the most economically damaging decision of UPA-2 as also slightly besmirching what otherwise is an awe-inspiring reputation built over decades of service.
- That decision still reverberates even now as NDA clings on to the underlying approach yielding only rebuttals from the international forums. The most recent fallout of the 2012 amendment showed up last week when UK’s Cairn Energy filed a lawsuit in New York seeking to enforce an international arbitral tribunal’s award against the country. The obvious target is Air India, described in the suit as the alter ego of the country aimed to seize the airline’s assets. For the uninitiated, the retrospective amendment was introduced to nullify a Supreme Court verdict that went in favor of Vodafone International in its income tax dispute with the government.
- As if on cue, the tax amendment set off a chain reaction potentially opening up cases that were done and dusted long back. One such case that was exhumed pertains to Cairn Energy in 2006 wherein the income tax department even sold its financial assets to realize the tax demand. This action led to both entities filing arbitrations abroad claiming the government’s actions violated its bilateral investment treaties with the Netherlands and UK, respectively. No wonder, India lost both cases. It is in the best interest of India’s long-term economic benefit to burying for good the 2012 retrospective amendment act. Otherwise, the investment atmosphere will remain vitiated dissuading the prospective foreign direct investors from investing.