That the government is more than ever focused on investment, especially foreign direct investment (FDI), is well taken. However, emphasising the importance of investment is one thing and creating the right environment, along with putting in place the related facilitating measures, is another. There was, in fact, no lack in recognising the merits of investment in the past too, as successive governments considered it worthwhile for repetitive utterances, often to the extent of rendering the issue banal, if not totally meaningless.
In a recent announcement the government has said that it would add more to the already available incentive package for foreign investors including providing subsidy to encourage establishment of central effluent treatment plants (CETP) in the proposed special economic zones (SEZS). Understandably, the CETP is a highly cost-intensive installation, but once in place, it is capable of keeping the work environment of an industrial zone clean besides its crucial role in protecting the environment against pollution of all sorts. In the formulation of the incentive package for the SEZs by the Prime Minister's Office (PMO), sharing the cost of installing CETP has reportedly come up as a major factor to attract foreign investors. Up to 50 per cent cost of the CETP would be provided by the government as part of the incentive package. Most of the other incentives are in terms of fiscal and financial benefits, such as tax waiver, duty-free import of capital machinery and equipment, rebate in registration fees for land, value added tax (VAT) concession for payment of utility services etc. Foreign investors will be allowed to bring five per cent of a factory's workforce from their own countries.
If the government considers announcing such incentives charming enough to attract investment, the outcome might eventually prove too little in terms of expectations. Offering incentives in fiscal terms becomes elusive, even meaningless, if an investor in his very start-up gets stuck with all kinds of conceivable bottlenecks. That is to say, if facilitation in the form of infrastructure is not up to a certain acceptable level, an investor would scarcely look at what the government offers by way of fiscal and financial incentives. This is a stark reality that this country has been grappling on, ever since attracting foreign investment figured in the agenda, albeit in the political one. It may be a hard fact, but the government must recognise that inadequate infrastructure, corruption and inefficient bureaucracy were found to be the key hindrances to increasing investment up to a desired level.
Putting in place the required infrastructure is both time- and cost-consuming. Successive governments resorted to this rationale to shield their positions while in power, and whatever that was in place could barely match the soaring demands for, to cite here some relevant areas, electricity, gas, roads, SEZs, industrial parks and so on. Coupled with insufficient infrastructure, political instability, inadequate access to financing, discontinuity in government policies, lack of trained workforce are, to put it bluntly, potential disincentives to investment, especially foreign investment. Fiscal incentives can only be meaningful if these are complemented and reinforced by on-the-ground facilitations, of which infrastructure is the predominant and supremely motivating one.
