PM Modi’s ‘Make in India’ tracing the steps of the lion?

The manufacturers have now been allowed to sell their products through wholesale and/or retail, including e-commerce. Further, apart from a minor relaxation on the requirement of mandatory domestic sourcing, the single brand retail trading (SBRT) sector has also been liberalised further. Also, the SRBT entity operating through brick and mortar stores shall now be able to undertake e-commerce activities.

Also, government approval will not be required for investment in LLPs engaged in sectors where 100 percent foreign investment is permitted under an automatic route.
The changes brought in the FDI Policy do seem to encapsulate the investment incentives, however certain restrictive provisions still prevail such as the provision of an exit option without an assured return, which serves as a huge impediment as it exposes the foreign investor to huge capital risk.

2) The legislative overhaul: The Companies Act, 2013 (Companies Act) has been amended so as to simplify certain norms provided therein. Further, the private companies have been exempted from certain restrictions defined in the Companies Act. The private companies have been provided with various alternatives to seek financing solutions along with increased latitude to conduct business and accommodate the terms and conditions of a foreign investor. However, few issues under the Companies Act still remain unaddressed such as mandatory requirement of having a resident director from the date of incorporation as it becomes challenging for an investor to immediately appoint a suitable candidate, especially in the initial stages of setting up of business in India.

An ordinance has been introduced to amend the Arbitration and Conciliation Act, 1996 (Arbitration Act). The ordinance codifies or negates various stand points framed by the judicial precedents, thereby putting an end to the judicial debate. The ordinance introduces the much-awaited fast track process for arbitration. The amendments in the said Arbitration Act will increase commercial viability of arbitrations in India, however parties will now have to expressly exclude the applicability of Part I of the Arbitration Act.

With regards to labour reforms, the Government is in the process of amending the Factories Act, 1948 to align the provisions with the existing commercial exigencies. The Rajasthan government recently amended the Industrial Disputes Act, 1947 to allow industrial establishments of up to 300 workmen to lay off their workers without seeking government approval.

3) Simplification of clearance mechanism: The Government has introduced various e-portals such as www.ebiz.gov.in for obtaining various industrial/ company/tax registrations; www.efclearance.nic.in for seeking environment/forest/wildlife clearance; and www.efilelabourreturn.gov.in for registration of units for labour identification number, reporting of inspection and submission of returns. This simplification of the procedure of obtaining nods/licences should be brought under a single domain rather than multiple domains.

The Make in India initiative is laudable in its efforts to not only prioritise increasing investment options in India but also identify and address the regulatory hurdles faced by foreign investors. However this initiative could be complemented with substantial changes in specific legislations.

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Endnotes:
1. Based on Press Note No. 12 (2015 Series) dated November 24, 2015 released by Department of Industrial Policy & Promotion, Ministry of Commerce & Industry.
2. Prior to the Reforms, FDI was allowed only in tea plantation under the approval route.