The new Prime Minister Mr. Narendra Modi, since his victory has asserted the fact that he wants to make India a business friendly nation. The new government under Mr. Modi has already announced a ‘Make In India’ campaign which will focus on domestic production. Modi’s vision is to decrease red-tapism in India and is keen to improve India’s ranking for doing business and bring it into the first 50 as the World Bank has reported that India is placed 142 among 189 countries, down two positions from last year.
One of the major reasons for this dismal ranking is the Companies Act 2013 which, barring the concepts of ‘one person company’, ‘one woman director’, ‘increased role of independent directors’, ‘provision of CSR’ and ‘class action’ has nothing new. With its 29 chapters, the Act only creates more confusions. Moreover, provisions with regard to related party transactions, holding-subsidiary relationship, loans/guarantees, borrowings/creation of security, electronic voting, scope of CSR etc. despite clarifications from the department continue to create panic and disrupt business.
Foreign Direct Investment or FDI is another problematic area as tax laws discourage foreign companies from investing. The finance minister Arun Jaitley has promised tax reformation and hopefully will be able to formulate more friendly measures which will encourage FDI. The ‘Make In India’ campaign will only be a success if both the Companies Act 1956 and 2013 are restructured to make business and investments more friendly. India continues to be governed bizarrely under two Companies Acts, resulting in a strange business environment. It is for the wholehearted good of the business community that the Companies Act 2013 be scrapped and rewritten. With a new set of rules and a strong ‘Make In India’ campaign, the business community will give its best to ensure that India’s global ranking as a business friendly nation improves.