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To augment the country’s growth potential and global competitiveness, Finance Minister Nirmala Sitharaman announced the government's intention to initiate “transformative reforms” across six domains in the next five years. This list of domains encompasses the regulatory realm, the power sector, urban development, mining, the financial sector, and taxation.
“A light-touch regulatory framework based on principles and trust will unleash productivity and employment,” she said, while promising several regulatory reforms to facilitate ease of doing business by updating old laws in line with technological innovations and global policy developments.
The Budget proposed setting up a high-level committee for regulatory reforms to review all non-financial sector regulations, certifications, licences, and permissions. “The committee will be expected to make recommendations within a year. The objective is to strengthen trust-based economic governance and take transformational measures to enhance ‘ease of doing business’, especially in matters of inspections and compliances. States will be encouraged to join in this endeavour,” Sitharaman said.
The government will also launch an Investment Friendliness Index of States in 2025 to further the spirit of competitive and cooperative federalism. Under the Financial Stability and Development Council, a mechanism will be set up to evaluate the impact of current financial regulations and subsidiary instructions. “It will also formulate a framework to enhance their responsiveness and development of the financial sector,” Sitharaman said.
The finance minister also announced the Jan Vishwas Bill 2.0 to decriminalise more than 100 provisions in various laws. In the Jan Vishwas Act 2023, more than 180 legal provisions were decriminalised.
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She promised to roll out the revamped central KYC (Know Your Customer) registry in 2025 to simplify the KYC process. “We will also implement a streamlined system for periodic updating,” she added. The central KYC will facilitate uniformity and inter-usability of KYC records and processes across the financial sector, with a unique KYC identifier linked to independent ID proofs.
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Sitharaman said a new income tax Bill will be introduced next week, reaffirming the tax department’s commitment to “trust first and scrutinise later”.
“The new Bill will be clear and direct in text, with close to half of the present law, in terms of both chapters and words. It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation,” she added.
On power sector reforms, Sitharaman said the government will incentivise electricity distribution reforms and the augmentation of intra-state transmission capacity by states. “This will improve the financial health and capacity of electricity companies. Additional borrowing of 0.5 per cent of GSDP will be allowed to states, contingent on these reforms,” she said.
Sitharaman announced that the government will set up an Urban Challenge Fund of Rs 1 trillion to implement the proposals for ‘Cities as Growth Hubs’, ‘Creative Redevelopment of Cities’, and ‘Water and Sanitation’ announced in the July Budget.
“This fund will finance up to 25 per cent of the cost of bankable projects, with a stipulation that at least 50 per cent of the cost is funded through bonds, bank loans, and PPPs. An allocation of Rs 10,000 crore is proposed for 2025-26,” she added.
Mining sector reforms, including those for minor minerals, will be encouraged through the sharing of best practices and the institution of a State Mining Index, she said. “A policy for the recovery of critical minerals from tailings will be brought out,” Sitharaman announced.
Under financial sector reforms, she raised the foreign direct investment (FDI) limit for the insurance sector to 100 per cent, up from 74 per cent at present. “This enhanced limit will be available for those companies that invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified,” she added.
