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Ease of Doing Business: Cut through the Red Tape

When it comes to the ease of doing business, the onus for economic reforms devolves solely on the bureaucracy at the centre as much as in states

analysis Updated: Mar 16, 2016 21:26 IST
Realising the importance of the issue, during the launch of Make in India in 2014, Prime Minister Narendra Modi announced that the Centre would push for India’s ease of Doing Business ranking to be within the top 50
Realising the importance of the issue, during the launch of Make in India in 2014, Prime Minister Narendra Modi announced that the Centre would push for India’s ease of Doing Business ranking to be within the top 50(AP)

Did you ever comprehend how difficult a place India is to do business? The World Bank’s 2016 edition of Doing Business (DB) analysed the health of 189 economies based on detailed diagnostics, measuring regulatory quality and efficiency. In overall Ease of Doing Business, India ranked 130th, a discernible improvement from 142 in the 2015 report. Even the 130th slot falls below some Saarc countries — Bhutan ranks 77th, Nepal 99th, Sri Lanka 107th. For starting a business, India takes 29 days on average and ranks 155th — New Zealand at the top of that table takes just half a day. Singapore takes 26 days to issue a construction permit — India takes 191.5. For obtaining an electric connection, South Korea takes 18 days, India takes over 90.

New Zealand, numero uno in registering property, takes one day; India, ranked 138th, takes 47 days. The average duration of bankruptcy proceedings in India is around 4.3 years — in Singapore it is just 9.5 months. For getting credit India ranks 42nd, for enforcing contracts it is 178th.

Read |India up 4 places in World Bank’s ease of doing business list

Enabling to do business with ease helps not only commercial and industrial enterprises but citizens’ interaction with myriad State agencies and functionaries, not to talk of instilling requisite confidence in foreign investors to prefer India among competitive suitors. Excessive time to obtain clearances, manifold inspections, multiplicity of forms and outdated and vague procedures sap their vitality. Business and industry have cried hoarse for having India’s DB regime simplified, pleading for far more action more quickly. Realising the importance of the issue, during the launch of Make in India in 2014, Prime Minister Narendra Modi announced that the Centre would push for India’s ease of DB ranking to be within the top 50.

There is a clear example of how a striking improvement in DB ranking can be achieved. Following Russian President Vladimir Putin’s May 2012 decree ordering Russian bureaucrats to strive towards improving the country’s DB ranking from 120th to 20th by 2018, Russia has moved from 120 in 2012 to 51 in the 2016 report. India has remained stuck at around 130.

Almost half of the appraised parameters lie within the purview of state governments. In India, local business regulations and their enforcement differ across locations. The implementation of 98-point action plan on ease of doing business, determined at a conclave of central and state mandarins, varies widely: Gujarat, Andhra Pradesh, Jharkhand, Chhattisgarh and Madhya Pradesh scored over 60%; Odisha, Maharashtra, Karnataka, Uttar Pradesh, West Bengal, Tamil Nadu, Telangana and Haryana performed between 40 and 60%; Delhi, Punjab, Kerala and Goa figured in the 20-40% range; and the others below 20%.

Read | ‘Boeing will invest billions of dollars in India’

No state has yet developed a comprehensive list of licences, NOCs and registrations required to set up and operate a business. Emphasising a need to bridge the gap between implementation on paper and on the ground, a Rajya Sabha sub-committee on ease of doing business has advocated an online single-window approval mechanism with enforceable timeline for each service, formulation of a common application form, a single post-construction completion and occupancy certificate, and auto approval based on certification of structural design and architectural drawings by recognised engineers and architects. The committee recommends a review of all applicable forms and rules for registration of an enterprise, providing for a single application form with a single-payment gateway and a unique business ID number, incorporating all information regarding a business, be taken as the sole reference for registration and other regulatory processes.

As there is a need to change the paradigm and implement the mantra of “minimum government, maximum governance”, the process to repeal archaic laws has to be accelerated. The much-avowed concept of single window has in reality been elusive. For trade across borders, a national single online application for getting all necessary certificates may be integrated as a ‘National Trade Portal’ to include all trade-related information. There’s no need to persist with export documents such as packing list, foreign currency exchange form, terminal handling receipts, cargo release order and certified engineer’s report.

An elephant-sized bureaucracy makes things slow and clumsy, breeds parasitic activities as strikingly revealed in Herando De Soto’s El Otro Sendoro, which describes Kafkaesque contortions in Peru, much like in India — inevitably lapsing into a maze of excessive regulation, high taxes, costly licences, bureaucratic inertia and rampant corruption.

Read | The ease of doing business comes from infrastructure

For very long swathes of Indian society have been made to wallow in regulatory morass. Having ruled the roost and maintained monopolistic hold on levers of power in central and state governments, the elite cadre has much to explain. They must seriously introspect, scale down, simplify and re-orient the structure, making it responsive in quick time to needs of people and industry. The important “works in progress”, as Union finance minister Arun Jaitley terms them, such as GST, insolvency and bankruptcy law, amendments in the companies Act 2013 and others, including easier tax compliance, time-definite waiver of penalty, etc, will hopefully be in place very soon.

To demonstrate some action, at the launch of Start Up India in January, a bevy of senior bureaucrats promised a regime of value creation — a 24-hour time limit for a company to be registered, the single-page registration form to be further simplified, no inspection for three years, self-certification for compliance with many labour and environment laws, 80% rebate on patent fees, easy exit for failed start ups, etc. Buffeted by long years of tyranny of the licence-permit raj, young entrepreneurs and venture capitalists listened with much cynicism. The prime minister must have grasped the imperative need to put the intractable governance machine on track and apply a surgeon’s scalpel to rid it of accumulated cancerous growth, contributing to the wanton web of red tape.

Raghu Dayal is a former chairman of ConCor

The views expressed are personal