Budget2015 NRIs have a wish list
As for the central message that an NRI/PIO want to hear from Modi’s most important budget of his term can be best summed by what he said during an event in central park New York “May the force be with you
“Veni Vidi Vici!” he came, he saw and he conquered like Julius Caesar. That could best sum up Modi’s whirlwind tours of USA and Australia which could be said as the main course and New Zealand, Fiji as the dessert and side-dish, in a feast for his overseas supporters and the shutterbugs back home, not to mention the media channels who were busy discussing the global direction with the coming together of India and the USA.
While the overseas Gujarati community at large is undeniably the backbone of Modi’s support base, the in general mood of the expatriates has been expectant. Now coming to the budget part it is a well-known fact that Modi government’s first budget was a quickie with no time in particular for policy planning and also due to the various electoral compulsions in lieu of the impending state elections that had to be won, taking advantage of the huge momentum that was generated.
The upcoming budget is Modi’s best shot at any structured reforms that might set the tone for the story of growth of his stint as a Prime Minister. There are no electoral compulsions in the very near future that might shackle his legroom in this aspect.
Coming to the nitty-gritty of the finance and economics world, to start with the general outlook of the western economic powerhouses, analysts and the governments at large has been best summed by the newly appointed US envoy to India Richard Verma. The key points put forthright by him at the ISB (Indian School of Business) event are sustain lower fiscal deficits to reach the target of 3.6% set earlier, protect intellectual rights (has been the theme song of the western conglomerates for a while now), spur growth by a mix of private corporate investment and public spending in infrastructure, create new avenues that provide manufacturing jobs and recruit the newly skilled and temporary workers entering the job markets. Better management of public sector units, targeted divestment in public companies etc. etc.
This of course can be done by changing the draconian land acquisition bill that was passed by the earlier Congress government in haste as a measure of populism to gain political capital.
Uneven tax slabs and operational (NRO/NRE) account rules
One of the biggest worries for NRI’s is the tax slabs at which the interest is levied on any remittances sent home (India) currently.
As per the Reserve Bank of India (RBI) regulation the Government of India allows an NRI to remit funds up to USD 1 million($) per financial year abroad using a Non Resident Ordinary Rupee (NRO) account.
If the remittance consists of interest from the NRO deposit, the bank is required to deduct tax at source on the interest at the rate of 30%. If an NRI living in the US or UK or any other country that has a Double Taxation Avoidance Agreements (DTAA) with India, then the NRI is eligible for a reduced TDS rate of 15%. The bank will require the NRI to submit a Tax Residency Certificate from the country of residence, besides several other documents so as to avail of this reduced rate.
On the other hand a Non Resident Rupee (NRE) account while not taxable at the source by the Indian government cannot be opened in partnership with an Indian resident.
There should be a uniform tax slab rate for all the countries especially to prevent the odd scenario of DTAAs that India has signed with countries which do not have personal tax. The basis of a DTAA is that a particular income is taxed in both countries. However in such instances where the foreign country may not levy personal tax on its residents, and India has a DTAA with those countries, it allows NRIs of those countries to avail a reduced rate of TDS. This a grey area and favors a few countries.
This subsequently might be left to the banks discretion for handling. This mountain of paperwork required by the bank including self-declarations and other supporting documents puts the NRI’s at disadvantage, especially the small to medium level PIO’s (Person of Indian Origin) who are interested in some kind of financial venture back home but would not dare given this complex process.
The whole confusion between the NRI/NRO accounts and the tax rates (NRO) need to be streamlined and a uniform rate to be applied or specified (if needed on a per country basis) that can be periodically revised by the RBI. This would bring in valuable foreign investments in the form of small to medium level NRI’s/PIO’s who want to invest in India, albeit on a smaller scale. The restrictions on joint operation with Indian residents is also to be revisited as the “absence of NRI” is the biggest impediment that prevents him or her from any collaboration with their home country. A government website can be opened that specifically targets such small level NRI investors and addresses all information, paperwork (through online portals and forms) etc.
Land for small scale NRI’s/PIO’s to set up small to mid-sized industries
Second and most important policy change which is also linked to the land acquisition bill is the revisiting of the whole concept of “Special Economic Zones (SEZ)”. Certain allocations are to be made again for small to medium level NRI’s who want to help kick start growth by establishing smaller level units/industries to which they can contribute monetarily and skill wise.
For example a welder in a Gulf country might have a novel way of creating specialty fittings that might have demand in the overall global market by streamlining his knowhow of advanced or more available technologies in his country of occupation.
Single Window Clearance Portal for NRI’s/PIO’s to set up small to mid-sized companies
The proficiency of such small level NRI’s/PIO’s should be streamlined by offering them land allocations (although on a smaller scale) using the much talked about but still elusive “Single window clearance” system. The above mentioned portal that targets NRI’s/PIO’s can be used for the said purposes to help them prevent wasting the valuable currency they bring in to red tape and corruption. Any equipment they need to import can also be facilitated through this clearance window in the portal/website. This will help create new companies (not zombies) that are steady in growth and are backed by a solid technical knowhow of the current advances in the global aspect. New Indian workforce entering the market can also be trained in such latest state of the art skills, whether it is pertaining to small scale manufacturing or services, telecommunications or hardware.
It is an open secret that in the name of land pooling for SEZ’s several thousands of acres of land across India has been misused, handed over to powerful interests through middlemen and land sharks. Huge tracts of such unused land is still lying vacant in the hands of real estate moguls that can be reclaimed and set to correct purposes.
Thirdly and most importantly “the absence of an NRI factor!” is so important of a broad factor that it certainly deserves the final say. This is something that should not be working against the interests of NRIs, especially those who have family and cultural moorings still intact with India and who are willing to contribute to their homeland in one way or another, mostly in partnership with their families and friends who still reside back home. The whole concept of NRO tax slabs, and the differences in terms of the stakeholders of operation for an NRE/NRO needs to be revisited. A single window clearance system for small scale NRI/PIO’s through a central portal that also helps them procure land (deals with local state and national laws), register companies and handle any process to be adopted so as to import technology/knowhow, into India will definitely negate the biggest impediment to an NRI from contributing to India, which is their absence.
When will be find “Made in India’s” in a Walmart in the USA?
The story of China whose products decorate more than 90% of the manufactured goods here in the US was in the making since the early 1980’s when Deng Xiaoping set the stage for PCO’s (Person of Chinese Origin) to come from across the world besides Hong Kong and Taiwan to bring in their expertise and setup shop, to avail of the extremely cheap labor available in mainland China. India can definitely emulate the dragon in this regards, especially given the Indian people’s potential. The “Make in India” campaign started by Modi can take steps in this directions and branch out as “Make in India, NRI’s!”
As for the central message that an NRI/PIO want to hear from Modi’s most important budget of his term can be best summed by what he said during a “Star War” like appearance at an event in central park New York “May the force be with you!” All said and done Mr. Modi if not sabers at least equip us with sticks!
