Ease of Doing Business: Still a Long Way To Go

The efforts taken by National Democratic Alliance (NDA) to ease the regulatory environment notwithstanding, the perception of most business enterprises is that little has changed on the ground.

This comes as a wake-up call to the government and a reminder that the legacy of red tape is far more tough to undo than what has been thought so far. The study also reveals that the experience of regulatory reform has not been uniform across the country.

A survey by NITI Aayog and Mumbai based think tank IDFC institute of formal Indian manufacturing firms, has found that, as of the 2016 reforms by the NDA government, factory-owners largely do not feel things had changed excessively.

The results exhibited that for a majority of respondents, parameters such as setting up a business, land and construction, environment, labour, water and sanitation, taxes, and access to finance remained the same compared with a year ago; on legal matters, they reported that things had deteriorated. The survey was conducted in 2016. Last year, the World Bank’s Ease of Doing Business Ranking placed India at a lowly 130 out of 150 countries.

The Niti study has surveyed over 3,000 manufacturing firms all over the country, while the World Bank survey is focused mainly on Delhi and Mumbai, and involves surveying expert opinion to form global rankings.

According to the Niti survey, on an average it took enterprises about two years to resolve a legal dispute and there is wide disparity across states. On an average, companies witnessed around 46 hours of power shortage in a typical month. It took firms 118 days to set up a business. The World Bank's Doing Business survey shows that it takes 26 days to set up a business but this is restricted to Delhi and Mumbai.

Further, the awareness among the firms of government’s actions to improve the business climate is surprisingly low. As per the survey, only 20 per cent of the firms surveyed informed about using single-window systems for setting up a business. A majority of well-established firms nearly 59 per cent didn’t even know of this tool, which greatly eases compliance burden.

However, the study suggests that in labour-intensive sectors like textile, apparel and footwear, more flexible labour laws can aid in scaling up to meet order demand. Improved information to entrepreneurs about “single-window” approvals in states can improve matters. As would better availability of power and finance, especially in poorer states. Undoubtedly, the ease of doing business can be much improved.

Latin Manharlal Group