Pradeep Multani
Ease of doing business is crucial for the overall growth and development of trade and industry as it attracts foreign investments and provides a considerable boost to the domestic businesses. Also, keeping in view the rapidly changing global trade and investment dynamics amid pandemic COVID-19, providing a more conducive policy environment to foreign investors has become essential. Ease of doing business helps in attracting large chunk of foreign investments, boost industrial activities and create tremendous employment opportunities for the growing young work force in India.
Over the years, the Government has given major thrust to ease of doing business, undertaken plethora of economic and business reforms and has worked aggressively to ensure that India moves up on the World Bank rankings of ease of doing business. As a result, India’s performance on the World Bank’s Ease of Doing Business Index improved at a remarkable rate, rising from 142nd position in 2015 to 63rd position in 2020. Further, 2020 has been the third year when India was recognized for considerable improvement in its business environment, which shows that the Government is committed to make it easy to do business in India for making it a global manufacturing hub.
On the back of consistent efforts of the Government, the procedural requirements for the industry have been reduced and the communication between Government departments has become transparent and hassle free, however, the cost aspect of doing business still needs to be relaxed further. There are various approvals, documentation requirements and multiple visits to departments that consume a significant amount of time and initial investment in a business. At this juncture, few suggestions to boost ease of doing business in the country are as follows:
Cost competitiveness of our businesses enterprises should be enhanced and a level playing field should be created. The Government should focus on further reducing the cost of doing business in the country including:
- Cost of Capital: The banking sector should transmit the full effect of recent cut in repo rate and lower the lending rates immediately to reduce the cost of capital for the businesses. Also, to reduce the cost of capital, we need further reduction in the Repo rate to maintain and rejuvenate domestic demand and enhance the competitiveness of producers in the domestic market and exporters in international market.
- Cost of Compliances: Due to a number of mandatory regulatory compliances, there is a cascading effect on the overall cost of doing business. Simplification of compliances would help in making the policy environment more industry friendly, allow firms to focus on their core business and keep compliance cost low.
- Cost of Logistics: The Government should further improve the export logistics infrastructure; remove bottlenecks at ports to reduce costs and improve ease of doing business for industry. India has been struggling with high logistics costs, which contribute for around 14% of GDP, making exports uncompetitive when compared to those of other competitive nations, where the same costs account for less than 10% of the GDP.
- Cost of Land and Availability of Land: The procedure to acquire land should be free from complex and costly procedural bottlenecks.
- Cost of Power/ energy: For electricity bills of Centre and State, clause of minimum fixed charges should be waived and Government should charge on the basis of actual charges.
- Cost of Labor: The Government should focus on a skilled and high productivity manpower base to increase the competitiveness of firms in the international and domestic market.
Further, it is suggested that there should be only one time registration in every department along with approval within 5 working days or deemed approved / permitted after 5 days. This will ensure faster and efficient action and decision-making along with contract enforceability. Further, the focus is required on reforms like digitizing land records and giving land for long term lease.
It may be mentioned that each of the 30-40 departments which industry has to face, has an inspector plus enforcement team. It is suggested that inspection of industries should only be conducted by giving 15 days advance notice by speed-post / e-mail with purpose of visit. After inspection, if any defects are found, the establishment should be permitted to rectify the same. The visit and notice should be authorized in writing by Commissioner or Deputy Commissioner. The attitude of officials, bureaucrats and inspectors should be of enablers and supporters of industry and trade.
There should be only a one time registration of industry and trade. License word may kindly be omitted. Every three years reasonable fees may be levied as deemed appropriate. Further, there should be efficient and speedy justice system. All disputes should be decided within 365 days. All judges’ posts / vacancies should be immediately filled. The number of courts and judges should be doubled.
These reforms will provide a great support in enhancing ease of doing business in the country, reducing the cost of doing business, attracting the large chunk of foreign investments, boosting industrial activities and creating tremendous employment opportunities for the youth. It is needless to mention that enhanced ease of doing business has become an indispensible part for helping economy to sooner than later reach its potential growth trajectory and achieve the vision of US$ 5 trillion economic size along with being Aatmanirbhar in the coming years.
(The article is written by Pradeep Multani, President, PHDCCI)
