Unease of doing business

Unease of doing business

Last year, after the World Bank’s Ease of Doing Business Ranking placed India at a lowly 130 out of 150 countries, Prime Minister Narendra Modi asked bureaucrats to explain the reasons for the country’s poor performance and directed them to work on improving the ranking. About 10 months later, a survey by the Niti Aayog and the Mumbai-based think tank, IDFC Institute, reveals that the efforts of the Centre and state governments to ease the system of permits and clearances notwithstanding, most entrepreneurs still feel hobbled by the country’s regulatory environment. The survey of more than 3,000 manufacturing enterprises across the country shows that most firms do not use the single-window systems for business and regulatory clearances.
Despite the Centre’s repeated claims that a firm can be incorporated in less than a week, the survey shows that even in the best performing state, Tamil Nadu, the process takes more than 60 days — on average it takes nearly four months to set up a business in India. The gap between claims and ground realities suggests that the government’s outreach system requires sprucing up. But the gap is also a sign of a persistent problem with governance in India: The difficulty of cutting the red tape of the lower bureaucracy. This explains why on an average, entrepreneurs need more than 100 days to get a construction permit. The World Bank’s report, last year, had also highlighted that delays in issuing construction permits affected the ease of doing business in India. The Bank’s report came in for criticism — some of it justified — by Commerce Minister Nirmala Sitharaman and Minister of Law and Justice and Electronics and IT, Ravi Shankar Prasad, who released the Niti Aayog-IDFC report. But the government cannot ignore the similarities in the two reports when the economy is slowing down and generating new jobs looks even more of a challenge.
The textiles, food processing and non-metallic minerals sectors account for almost two-thirds of the firms surveyed by the Niti Aayog and IDFC. What should also worry the government is the report’s finding that entrepreneurs in these employment-intensive sectors are more likely to face problems and securing construction and other permits, compared to the capital-intensive ones. The survey should serve as a wake-up call to government and a reminder that over two decades after economic reforms the Indian state is still flailing when it comes to easing the path for entrepreneurs. That’s a pity because the low interest rate cycle now should have revived animal spirits.