For Swiss companies, it is important to note that the basics of doing business in India will not drastically change and we can expect continuation of business-friendly reforms and policies into Modi’s second term. The Goods and Services Tax (GST) regime will be further streamlined including bringing petrol and diesel under GST. The Insolvency and Bankruptcy Code will be given more teeth to tackle debt and debtors. A new data protection law is likely to be enacted to curb cross border data transfers. The “Make in India initiative” is expected to gather further momentum in the next five years. This is particularly significant for the defence sector, where India is striving to be self-reliant by reducing dependence on foreign imports.
Macroeconomic changes on the horizon
While some progress was made with regard to the India-EFTA free trade agreement in Modi’s previous tenure, we can be hopeful that further negotiations could result in a deal in the second term. India currently ranks 77th on the World Bank’s Ease of Doing Business index; prime minister Modi aims to take India to the top 50. This ambition clearly indicates that more macroeconomic changes are on the horizon. Between 2014 and 2019, India attracted foreign direct investment worth CHF237 billion. The investment climate is expected to further improve through the introduction of investor-friendly policies, reforms related to labour and land acquisition, and new incentives for Make in India. On the reforms front, the draft Direct Tax code will be tabled by July 2019. This will replace the existing Income Tax Act (1961). The revised tax rules will focus on improving tax compliance, bringing more citizens into the tax fold and lowering corporate tax rates. In other measures, the Modi government is expected to heavily promote cashless financial transactions to the average consumer. The new government will present its first fiscal budget in July 2019 and the focus areas are likely to be job creation, tax reforms, and spending on infrastructure projects. Stay tuned!
For more information on the results of India’s elections, please visit Election Commission of India.