UPA anniversary: top 5 things that have kept investors away

The second term of the United Progressive Alliance government in office has seen far more lows than highs compared to the first term.

Here’s a look at the top five investor unfriendly moves during the tenure of UPA-II.

GAAR: This is one of the latest issues to hit the government already reeling under pressure from all fronts. Finance minister Pranab Mukherjee had proposed the General Anti-Avoidance Rules (GAAR) while announcing the Union Budget for 2012-13 in April. The anti-avoidance rules aim to target tax evaders, partly by stopping Indian companies and investors from routing investments through Mauritius or other tax havens for the sole purpose of avoiding taxes. However, the ambiguous language, the lack of details, and the sudden onset of the provisions have been among the factors that have upset foreign investors. The implementation of the rules were ultimately deferred by a year after FII inflows started to dry up.

Retrospective tax: This was another proposal that stirred a hornet’s nest among investors and companies. The finance minister had in the Union Budget announced a proposal to retrospectively tax overseas deals that involved assets in India. Under the proposal, Vodafone Group would have to pay capital gains tax of $2.2 billion for its 2007 acquisition of Hutchison Essar.

Pending bills and stalled reforms: Parliament has been dragging its feet on several key Bills, such as the Pension Fund Regulatory and Development Authority Bill and the Insurance Laws (Amendment) Bill. Both these Bills, which propose to increase the ceiling for FDI investment, have been stalled due to opposition from allies as well as opposition parties. Proposals to increase FDI in aviation, defence and multi-brand retail have also seen little headway.

2G scandal: No other scandal has been so closely watched and affected to many government functionaries, telecom companies and the biggest names in corporate India than the 2G scandal. The main accused in the case, former telecom minister A Raja, walked out of jail earlier this month after spending 15 months behind bars in a scam that, according to government reports, cost the exchequer around Rs 1.76 trillion. Raja has been accused of giving away second-generation telecom spectrum at throwaway prices to telecom companies. The Supreme Court had in February quashed all the 122 telecom licences allotted during Raja’s tenure. Uninor, Loop Telecom and STel have faced the maximum brunt of this scandal. Raja, DMK member K. Kanimozhi, former telecom secretary Siddharth Behura, Raja’s private secretary R.K. Chandolia are some of the prominent faces accused in the scam.

Direct Taxes Code and the Goods and Services Tax: Deadlines for implementation of both these key Bills have been missed several times. DTC has missed the April 2012 deadline and is likely to be introduced by April 2013, while GST has also missed its deadline by over two years as the Centre and the states have repeatedly failed to arrive at a consensus.