UK companies are upbeat about the ease of doing business in India, particularly Maharashtra and Brexit has stimulated more of them to engage more deeply with India
The UK India Business Council (UKIBC) has released its 5th annual Doing Business in India Report. The report is based on the results of extensive discussions, including a roundtable in London with Commerce Minister Goyal, and a survey that captured the views of UK companies and higher education institutions on the operating environment in India and their reform priorities.
Overall, the survey respondents were positive about India, with 56% stating that it is getting easier to do business in India, and only 21% saying that it has not improved.
Perhaps the most positive message in the report for Mr. Modi’s Government is the dramatic drop in perceptions of corruption. When the UKIBC published its first Doing Business in India report in 2014, over 50% of respondents cited corruption as a top barrier to operating in India. This figure has improved year on year, and in 2019 it dropped to 17.5%. There is clearly still work to do to eliminate all forms of corruption, but the continued reduction is a positive.
The most persistent barrier to doing business continues to be ‘legal and regulatory impediments’, which were cited by 59% of respondents as a major barrier. 'Identifying a suitable partner' and ‘taxation issues’ are the next two most cited barriers.
It is therefore no surprise that the most popular reform among UK businesses is ‘improving the quality of bureaucracy, with 28.6 percent of respondents urging the Government of India to act in this area.
The second most popular reform request was related to the bureaucracy, with 16.9% of respondents calling for a ‘simplification of the Goods and Services Tax (GST)’.
Nevertheless, it is worth noting that calls for the simplification of GST have reduced from 24 percent in 2018, reflecting that companies are coming to grips with India’s new tax system, and India has improved its implementation since the original rollout.
The Government of India announced the reduction of India’s corporate tax rate (from 30% to 25.17% after cess and surcharges are accounted for) prior to the completion of our survey, perhaps one reason as to why India’s previously high corporate tax rate was not mentioned by our respondents.
The highest scoring aspects of the Indian business environment continue to be tele-communication facilities, closely followed by the availability of skilled labour, the availability of support and service providers, and the availability of supply chain.
For the first time, the UKIBC canvassed views on how India’s States and Union Territories are performing on the ease of doing business. When asked “which states are making the most improvements on business environment?”, Maharashtra was the clear winner, with 36.67 percent of respondents giving it the honour, followed by Delhi, which captured 20 percent of the vote.
Maharashtra has been a preferred destination for UK businesses consistently with topping the charts in UKIBC EODB 2018 also. The evidence is there with the number of UK businesses that have set up a base or manufacturing units in this State over the years.
With Brexit on the agenda of UK companies, 26 percent said that they planned to do more business with India as a direct result of the UK leaving the EU. This will be a further boost to the flow of goods, services and investment between the two countries.
On presenting the report to Dr P Anbalagan, CEO, MIDC by UKIBC Managing Director, Kevin McCole, Kevin had following to say, “it is no surprise that UK businesses have recognised that Maharashtra has out-performed other states in improving the ease of doing business, or that it is the preferred investment destination for UK corporates, across all sectors. The way the State Government has engaged with UK investors over the last few years has been impressive, particularly because the focus has been on solving ease of doing business issues.”