The Indian Budget 2016 & its impact on Swiss Business & Investment in India – March 10, 2016 At Credit Suisse Forum, Geneva

Mr. Francesco Gherzi, Chairman, Swiss India Chamber of Commerce,
Mr. V. Lakshmikumaran, Managing Partner, L & S,
Mr. Vincent Subilia, Deputy Director, CCIG,
Ladies & Gentlemen

At the outset, I'd like to compliment the Swiss India Chamber of Commerce for taking this initiative and organising this event on India's Union Budget 2016 & its impact assessment. Thank you for inviting me to deliver the welcome address. I understand that there will be a detailed presentation of the Budget. What I intend to do is to give you overall thrust of the Budget and highlight the priorities of my Government.

Let me begin by giving you the backdrop in which 2016 Union Budget was presented. This is important to understand the challenges and opportunities in front of the Indian economy.

Today the global macroeconomic landscape is going through a tumultuous phase. Global trade and commerce have been adversely affected by bottoming of prices of many commodities. Large economies, except India, are showing signs of slowing down.  Hence, we are likely to see a ripple effect. The global financial markets have been turbulent. We are observing volatile exchange rates. International investors are becoming more and more risk averse. The net result is that several economies are under considerable stress.

Let me give you some facts which speak for themselves. The Indian economy has grown 7.6% in 2015-16. The foreign exchange reserves have reached the highest ever level of about USD 350 billion dollars. The fiscal deficit in 2016-17 has been targeted at 3.5% of GDP. The current account deficit is projected to be 1.4% of GDP in 2016. IMF has hailed India as a 'bright spot'. I was in Davos for the World Economic Forumand was able to witness views of the experts that India's economic growth was quite high.  I also had the honour to meet the Hon'ble Finance Minister and the Governor of Reserve Bank of India, who explained India's economic programme in eloquent terms in WEF.

Presenting the Budget, the Hon'ble Finance MinisterMr. Jaitleysaid India will remain one of the bright spots in the world economy, in which most countries are struggling with slowdown.  Last yearIndia surpassed China to become the world's fastest-growing large economy.  “Amidst all this global headwind, the Indian economy has held its ground” he said.  “Thanks to our inherent strengths and the policies of the government, a lot of confidence and hope continues to be built around India”

The growth story of India continues to bloom, thanks in part to the benefit that it derived from a sharp reduction in crude oil prices, of which India is a major importer, as well as from the resilient domestic consumption.

India's budget of US $288 billion for the next fiscal year aims to accelerate economic growth through i) fiscal discipline,  ii) stimulation of infrastructure, investment, entrepreneurship and domestic consumption and iii) Focus on rural economy.

There was an expectation in the corporate world that the Government of India may follow the classical Keynesian solution and pump the economy by increasing public spending, especially on the infrastructure front. However, apparently that would have meant straying away from the path of fiscal prudence and relaxation of the commitment to keep the fiscal deficit to the committed figure of 3.5 per cent of India's GDP.   By maintaining the fiscal target India's credibility increased and encourages foreign investors to invest in India.  This can giveroom for policy interest rate reductions by the Central Bank.

Budget further confirms that India has now achieved the highest coal production, highest ever capacity addition in generation, and highest ever increase in transmission lines as India leap frogs towards transformative growth.  Bolstered by strong macro fundamentals the Sensex closed last Friday with the highest weekly gain in 5 years.

Let me come to some of the key highlights of the budget 2016-17, especially the Small & Medium Size Enterprises. India's agenda for the year 2016-17  is to 'Transform India' so that there is a significant impact on the economy and the lives of its people. The focus is on ensuring Macro-economic stability and prudent fiscal policy - boosting domestic demand, continuing the pace of economic reforms and various developmental policy initiatives. As part of the "Skill India" mission, Government has announced to set up 1500 Multi Skill Training Institutes across the country with a fund of 250 million Swiss Francs and skill 10 million youth over the next three years.

Foreign investment will be allowed in the insurance and pension sectors in the automatic route up to 49%. There will be 100% FDI in Asset Reconstruction Companies (ARCs), and such investment will be permitted through automatic route.

Investment limit for foreign entities in Indian stock exchanges will be enhanced from 5 to 15% on par with domestic institutions. There is good news for Swiss food processing industry, the Government of India intends to allow 100% FDI through Foreign Investment Promotion Board route in the marketing of food products produced and manufactured in India.

With a view to promoting Make in India, foreign investors, subject to certain conditions will be accorded Residency Status, unlike the current regime where the investors are granted business visa only up to 5 years at a time.

The Government has already relaxed the FDI policy in over a dozen sectors, including defence, railway, medical devices and civil aviation.  FDI to India had increased by 40% to US $ 29.44 billion during April-December in the current fiscal year.

The government kept its commitment with the Base Erosion Profit Sharing, more commonly known as BEPS provisions which were announced by the OECD and the G-20 country tax officials working together to align taxation to jurisdictions where economic value is created.

When you read the fine print you will get this sense that there are two primary focus areas behind the budget provisions, One is to promote the flagship programme of the government that is 'Make in India' and the second focus is taking forward the 'Ease of Doing Business' initiatives.

The Budget also underscores the government's commitment to provide further impetus by way of a clear action plan for sustainable growth of India's infrastructure – one of the largest investment opportunity in the world.

People's expectations of a stable and prosperous economic climate, which reduces poverty and inequality levels and ushers in prosperity, are mounting, and the government has tried its best to strengthen the pillars which will take India towards a steady economic growth.

Friends, the Budget is surely investor friendly and a milestone achievement in India as it is transforming policy by leaps and bounds.  The government's motto is 'SabkaSath, SabkaVikas' (collective efforts, inclusive growth).

I'd like to conclude by saying that India remains the most  attractive Foreign Investment destination.

Come and Invest in India.

Come and Do Business in India.

India Beckons!

With these words, I thank you once again for the opportunity to share my thoughts.

Thank you.

******