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360 Degree View September 2024
1. Journey of a Decade for Make in India Initiative
In the wake of the 2013 economic downturn, the Make in India initiative emerged as a crucial response. It quickly became a unifying force for various stakeholders, signaling a fundamental shift in the government’s approach—from being an issuing authority to becoming a supportive business partner, in line with the Prime Minister’s vision of “Minimum Government, Maximum Governance.” The initiative is built on four pillars: New Processes, New Infrastructure, New Sectors, and New Mindset, all aimed at boosting entrepreneurship across various industries, particularly manufacturing
Focus Areas
The initiative has opened numerous sectors to Foreign Direct Investment (FDI), including defense manufacturing, railways, space, and single-brand retail. Six industrial corridors are under development, and industrial cities will emerge along these routes. Supported by major programs like the Production Linked Incentive (PLI) schemes, PM GatiShakti, the National Logistics Policy, Startup India, UPI and comprehensive tax reforms such as the Goods and Services Tax (GST), Make in India continues to fuel economic growth, job creation, and global competitiveness.
Progress
Over the past decade, significant measures have been implemented to improve the ease of doing business in India. Reforms include amendments to labour laws, online filing of returns, a streamlined regulatory environment, and longer validity for industrial licenses. As a result, India’s global credibility has strengthened, positioning the nation on the path to becoming one of the world’s leading economies. Foreign Direct Investment in India surged from USD 45.14 billion in 2014 to USD 84.83 billion. Additionally, India improved its ranking in the Ease of Doing Business index from 142nd to 63rd place. A notable success story is the Vande Bharat trains, India’s first indigenous semi-high-speed trains, which exemplify the achievements of the Make in India initiative, providing a modern and enhanced travel experience for passengers.
Future Outlook
Looking ahead, the future of India’s manufacturing and industrial sectors appears bright, driven by continued innovation, infrastructure development, and a strong commitment to economic excellence. The Make in India initiative lays a solid foundation for transforming India into a global manufacturing powerhouse.
2. Need to increase in Network of Private Hospital under AB PMJAY
The enrollment for the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PMJAY) is expected to commence soon. This initiative offers comprehensive health coverage of up to ₹5 lakh per family, irrespective of income, specifically benefiting 60 million senior citizens and 45 million families across India.
As private insurance premiums have surged by up to 50%, many senior citizens are turning to AB PMJAY for support. However, a significant concern persists: while private insurers provide access to a broad range of hospitals, such as Apollo, Max, and Medanta, the PMJAY primarily restricts patients to empanelled facilities, which are predominantly public hospitals. This limitation raises worries about the quality of care and availability of advanced treatments in public healthcare settings.
Moreover, some private hospitals within the PMJAY network often prioritize patients with private insurance due to faster payment processes. Private insurers typically pay these hospitals immediately, while hospitals under he Network of PMJAY to wait up to 60 days for reimbursement from the Government, leading to a disparity in patient treatment.
To enhance the benefits of AB PMJAY for senior citizens, more private hospitals need to be empanelled within the PMJAY Network. Additionally, the Government should ensure timely payments to these hospitals, akin to private insurance, to promote equitable access to quality healthcare for all senior citizens. This approach would ensure that they receive the care they deserve without compromising on quality or choice.
3. Skill Voucher System—A New Skill Development Initiative
The Government will soon launch a skill voucher system, Secretary of the Ministry of Skill Development and Entrepreneurship, Mr. Atul Kumar Tiwari said asserting that the Centre is actively seeking industry partnerships to upgrade 1,000 industrial training institutes nationwide.
The new system of Skill Voucher aims to transform 200 industrial training institutes (ITIs) into hub institutions, with 800 more serving as spoke facilities as part of a major initiative to enhance the country’s skill development ecosystem.
The National Credit Framework, introduced under the National Education Policy, has integrated skilling and education in terms of credits. Besides, regulations now mandate that up to 50% of degree course content be skill-based or vocational education-based and the curriculum for classes 6 to 12 has been revised, and skilling and application-based learning have found their place.
4. Slum Free Maharashtra- Affordable Housing
High-density housing in urban areas to ensure efficient land utilization, incentivizing private developers, and promoting public-private partnerships (PPPs) are some of the measures that the Government proposes to take as it seeks to boost the supply of affordable housing in the state. The draft housing policy issued by the State Housing Department says leveraging Pradhan Mantri Awas Yojana will be a key.
5. RBI imposes monetary penalty on HDFC Bank Limited
The Reserve Bank of India (RBI) vide its Press Release: 2024-2025/1075 dated 10 Sept 2024 informed that it has, by an order dated September 03, 2024, imposed a monetary penalty of INR 1 Crore on HDFC Bank Limited for the non-compliance with certain directions issued by it and following charges were made against HDFC Bank Limited which has warranted imposition of monetary penalty.
- Gave gifts (in the form of paying a first-year premium for the complimentary life insurance cover) costing more than ₹250 to the depositors at the time of accepting certain deposits;
- Opened certain savings deposit accounts in the name of ineligible entities; and
- Failed to ensure that customers were not contacted after 7 pm and before 7 am.
6. RBI imposes monetary penalty on AXIS Bank Limited
The Reserve Bank of India (RBI) vide its Press Release: 2024-2025/1075 dated 10 Sept 2024 informed that it has, by an order dated September 03, 2024, imposed a monetary penalty of INR 1.91 Crore on AXIS Bank Limited for contravention of provisions of Section 19 (1) (a) of the Banking Regulation Act, 1949 and the non-compliance with certain directions issued by it and following charges were made against AXIS Bank Limited which has warranted imposition of monetary penalty.
- The bank opened certain savings deposit accounts in the name of ineligible entities;
- The bank had allotted multiple customer identification codes to certain customers instead of a Unique Customer identification Code (UCIC) for each customer;
- The bank had obtained collateral security for agricultural loans up to ₹1.60 lakh in certain cases; and
- A wholly owned subsidiary of the bank undertook business of a technology service provider, which is not a permissible business that can be undertaken by a banking company under Section 6 of the BR Act.
7. Growth in the Hinterlands: Are Tier II and III Cities the Next Big Thing?"
Thanks to the availability of Finance, increasing income levels, social media, rapid urbanization, and improvement in infrastructure and connectivity, small towns of India are growing. The consumer behaviour in these cities and towns is evolving. Also, with the new bank account opening under the Pradhan Mantri Jan Dhan Yojana (PMJDY), the dependency on money lenders has been reduced and the Finance companies are venturing deeper into this market.
During the Pandemic, we have seen a surge in retail investors in the stock market with the opening of trading accounts with Zerodha. Now we see an expanding middle-class population in these small towns and cities eager to engage with premium brands. Hero MotorCorp and Honda Motorcycle are taking steps to make finance more accessible. Cities like Hubali, Mohali, and Coimbatore witness new Malls like InOrbit and Phoenix setting Malls there.
Rural consumers may prioritize immediate gratification over long-term savings, diverting funds away from essential investments in education or health. This shift in spending habits can create a false sense of security, making communities vulnerable to economic fluctuations.
If financial literacy doesn’t keep pace with access to credit, the very tools meant to empower can instead entrap rural populations in cycles of debt.
In summary, while access to finance can enhance livelihoods in rural India, it’s crucial to promote responsible borrowing, financial education, and sustainable spending habits to prevent potential pitfalls.
8. The Transparency Tug-of-War: Regulators and the UBO/SBO Challenge
Regulators like the Reserve Bank of India, the Ministry of Corporate Affairs, and SEBI demand disclosure by the entities on UBO or SBO that is Ultimate Beneficial Ownership or Significant Beneficial Ownership. This requires entities to peel off the layer behind the web of corporate structure to spot the real natural person at the peak who is taking the shot. The Anti Money Laundering Regulations, the Companies Act, and the Banking Regulations in the country require the entity to identify the last natural persons, behind every shareholder with a 10% or more equity stake in the investing entity.
Financial Action Task Force (FATF), a global body that fights money laundering and terror financing, identifies jurisdictions with weak measures to combat money laundering and terrorist financing (AML/CFT) in two FATF public documents that are issued three times a year. FATF places member countries in any of the four categories namely, ‘regular follow-up’, ‘enhanced follow-up’, ‘grey list’, and ‘black list’, regular follow-up being the top most category amongst the four. Only 5 countries in G20 including India have been placed in regular follow-up after the Mutual evaluation report. An Investor from a FATF grey list would not be allowed to hold 20% or more in a local finance entity. In addition to other Regulations, India has issued Press Note 3 which restricts investment in India from bordering nations, and the UBO details are required even if it holds less than 10%.
Across the Globe, differences in approach and documentation prevail in the identification of UBO or SBO. Several jurisdictions are less demanding and maintain the secrecy of such information and few have different thresholds and criteria for identification of UBO/ SBO. In case the foreign investor fails to give the disclosure, the Indian parties may be construed as non-compliant with Indian law.
Authorised Dealer Banks processing KYC for FDI transactions many times do not get granular data and hence they would hold a round of discussion before taking this up with Regulators.