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Getting down to business

Economic reforms kicked off in the country as far back as in 1991, but it is clear that both in pace and detail, there is much to be desired.

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Economic reforms kicked off in the country as far back as in 1991, but it is clear that both in pace and detail, there is much to be desired. The Nehruvian licence-permit raj may be over, but there is a plethora of government regulations that entrepreneurs have to cope with. This is the message in the latest World Bank report on doing business in South Asia. The good news is that India is ranked the top reformer in the region. The bad news is that a lot of the tedious red tape that made doing business in India so difficult in the past still exists. Doing business in Mumbai is a daunting task. It is easier to get things moving in Ranchi or Lucknow. This is an indication that reforms are no longer confined to commercial hubs but are spreading out evenly. Of course, India is still lagging far behind the scorching pace of reform that China has set, but that is to be expected. India has a vibrant entrepreneurial class that is a very big factor in energising the economy and often makes up for flaws in the larger system.

Where India needs to speed things up is to cut through the hassle of registering businesses and improve e-governance. With India as a frontrunner in the Gatesian millennium, this should not prove too difficult. Regulations are also a daunting prospect for the would-be entrepreneur or investor who has to run to a multiplicity of authorities for land approvals, building permits, power and water connections. One of the main stumbling blocks is the antiquated Industrial Disputes Act that is in dire need of modernisation to keep pace with India’s efforts to integrate and compete in the global economy. There are several barriers to retrenchment, forcing employers to retain unproductive employees.

A crucial infrastructural input for business is warehousing. Unfortunately, warehouse construction in India is the costliest in the world at 606 per cent of income per capita, according to the report. Kolkata is at the bottom of the heap but no surprises there. A drag on the labour market is the set of usually complex regulations, 47 at the national level and 157 at the state level. It is cold comfort that labour regulations in China, too, act as a deterrent to business. The remarkable thing is that these reforms, which hold the key to sustained economic growth, have stayed the course despite the fractious nature of coalition politics. The Left is clearly keen to go slow on labour reforms while the ruling party is pulling in the other direction. So we cannot expect miracles, China-style, but we seem to be getting there. Those who believe in the spirit of the reforms must ensure that the pace is not staggered.

First Published: Feb 17, 2007 18:04 IST