Businesses hoping to ride the global supply chain wave are hitting an unexpected brick wall in India: surprise tax demands.

“Stop having tax demands on business people which come out of the blue which vitiate all their operations for many years. I mean, have some control,” Rajan said in an interview with India Today TV.

This unpredictable tax harassment is not just annoying, but a deal-breaker for the manufacturers and service providers India needs to attract if it wants to become the world’s go-to alternative to China amid the post-pandemic reshuffle and US-China trade tensions.

“I mean, this is something that even within the government you hear, sort of worries about this kind of tax demand coming, but the government needs to control its tax authorities,” Rajan said.

LEVEL PLAYING FIELD

But it’s not just tax demands. Rajan stresses the need for a level playing field where policies don’t suddenly shift to favour national champions at the cost of foreign investors.

“Nobody wants privileges but they want some certainty about policies,” he said, adding that easing rules for domestic firms and solving long-standing issues like land acquisition are vital too.

“Of course, we also do need to do homework for domestic firms. Easier rules and regulations, more transparent as well as focus on things like land acquisition and so on which have often been a bugbear. But that said, we’ve made enormous improvements in infrastructure which I think will be helpful, uh, for whatever sets up in India,” he added.

The government must listen to businesses on the ground and act fast. Rajan pushes for ramping up reforms already underway, using technology to make compliance easier and to crack down on rogue bureaucrats. “We need to do that effectively if we are going to make a difference,” he says.

India has the chance to become a global supply chain hub. But first, it must fix these fundamental business hurdles, especially the tax surprises that keep knocking down comRaghuram Rajan warns India’s global supply chain dreams could crash before takeoff—unless it reins in rogue tax demands, ends policy flip-flops, and actually makes it easier to do businesspanies before they can even get started