Why in news?
- “NITI-IDFC Report” on the ‘Ease of Doing Business’ in India was recently published.
- This is a timely endeavour to assess the impact of the government initiatives at the ground level.
What is the background?
- Government has carried out a series of regulatory reforms to create a favourable investment climate.
- Various compliances mandated under the Companies Act have been done away.
- Commercial courts were setup under the commercial Appellate Divisions Act of 2015, to resolve commercial disputes in a time-bound manner.
- Insolvency and Bankruptcy Code (IBC) - 2016 was introduced to global quicken insolvency cases and address the NPA problem.
- FDI liberalisation has taken place in the defence, pharmaceuticals and in airport management.
What does the report state?
- The criterion adopted for determining the ease of doing business is the efficacy of these reforms.
- The “NITI-IDFC Report” studies this based on an enterprise survey of 3,500 manufacturing firms across Indian.
- Single window clearance: This system was introduced under “Make in India” initiative in 2014.
- It involves routing of all approvals required by an enterprise to set up a business through a hassle free common application window.
- Only 20% of the enterprises surveyed were found to have used this, which suggests either lack of awareness on the part of enterprises or ineffective implementation.
- Access to finance: Most enterprises rely on borrowings from banks and financial institutions as sources for finance.
- 61% of the enterprises surveyed reported that access to finance has either remained the same or worsened over the last year.
- Clearance Time: The survey finds that the average time taken to set up a business in India is 118 days, varying widely across states from 63 days in Tamil Nadu to 248 days in Assam.
- On an average, the time incurred for land allotment is 156 days and for getting a construction permit it is 112 days.
- The average number of days for completing labour-related compliances is 74 and for renewal of such compliances it is 62.
- Dispute resolution: The survey showed that the time taken for dispute resolution by enterprises varied across states, from less than one year to 13 years.
- For pending legal disputes, the enterprises surveyed reported an average duration of four years once the matter is taken to court.
- Sector Specifics - Start-ups & younger enterprises are found to have taken lesser time than older ones.
- Furthermore, labour-intensive industries were found to face major challenges than capital-intensive industries.
Where are the areas that need improvement?
- The reforms and their impact were pronounced in big cities but not clearly noticeable in smaller cities & rural areas.
- The government needs to work for effective implementation of the reforms introduced across all states uniformly.
- Creating awareness of the reforms introduced is needed to enable the enterprises to avail these benefits.
- Labour compliances need to be further eased.
- In this context, the proposed Model Shops and Establishments (Regulation of Employment and Conditions of Service) Bill, 2016 is a step in the right direction.
How does the future look?
- While the report does raise some questions about the efficacy of the reforms carried out, it is a fact that the government focused and is heading in the right direction.
- The results may not yet be clearly visible, but there is a greater amount of positivity about India among investors.
- It can be safely assumed that the coming years would witness faster growth with a lower compliance burden on corporates.
Source: Business Standard
