Context: The US in a report has ‘2021 Investment Climate Statements: India’ said that India “remains a challenging place” to do business.

• The report also lauded the structural economic reforms carried by the Government of India, in the wake of economic slowdown and Covid-19 pandemic. 

Key highlights of the development and US report

• The US has urged it to foster an attractive and reliable investment climate by reducing barriers to investment and minimising the bureaucratic hurdles.
• It also referred to the removal of the special constitutional status from the state of Jammu and Kashmir (J&K) and the passage of the Citizenship Amendment Act (CAA).
• The State Department report said that protests followed the enactment of the CAA but ended with the onset of COVID-19 in March 2020 and the imposition of a strict national lockdown.
• The management of Covid-19 became the dominant issue in 2020, including the drop in economic activity and by December 2020, economic activity started to show signs of positive growth.

India enacted extensive social welfare and economic stimulus programmes and increased spending on infrastructure and public health.

• The government also adopted production linked incentives to promote manufacturing in pharmaceuticals, automobiles, textiles, electronics and other sectors.
• These measures helped India recover from an approximately eight per cent fall in GDP between April 2020 and March 2021, with positive growth returning by January 2021.
• India enacted ambitious structural economic reforms, including new labour codes and landmark agricultural sector reforms.
• In February 2021, India announced plans to raise USD 2.4 billion through an ambitious privatisation programme that would dramatically reduce the government’s role in the economy.
• In March 2021, Parliament further liberalised India’s insurance sector, increasing the Foreign Direct Investment (FDI) limits to 74 per cent from 49 per cent.

India’s response

• India maintains that the CAA was its “internal matter” and that “no foreign party has any locus standi on issues pertaining to India’s sovereignty.”
• India has categorically told the international community that the scrapping of Article 370 was its internal matter.