Managing Compliance and Ease of Doing Business

India currently ranks 63rd in the Ease of Doing Business ranking of World Bank. Over the last 5 years, India has improved its rank by 79 positions, 14 positions in last year alone, by implementing policies to increase efficiency and support businesses.

While there are many factors which decide a country’s rank in the Ease of Doing Business Index, an important factor is reduction of compliance burden.

Compliance is a regulatory measure which helps the Government in keeping an eye on the extent to which law and order are being implemented. For that reason, compliance cannot be done away with completely, that would cause more harm than benefit. But at the same time Government needs to ensure that compliance do not become an obstacle to entrepreneurship. Same sentiment is promoted by the World Bank by keeping it as a criterion for deciding a country’s rank for ease of doing business index.

A good Ease of Doing business rank induces foreign and domestic investment and therefore provides thrust to a country’s economy. Understanding this, India, in the last few years has taken several incentives for promoting ease of doing business. Incorporation and registration procedures have been made easier & quicker, paid-up capital requirements have been made lenient, online systems have also been introduced by filing information and paying Government dues. However, the most noteworthy of all is recent passing of 4 Labour Codes by the Indian Parliament. This mammoth step couldn’t have been easy, merging more than 44 laws into 4 code, whilst ensuring deletion of age-old and irrelevant clauses and insertion of ease of doing business clauses.

But practically speaking, has above actually eased the procedure of doing business in India?

According to an analysis done by TeamLease Compliance in early 2020, there are a total of 677 Acts, 25,537 compliance and 2,282 regulatory filings at the central level alone in India. Many of the above are duplicate in nature, either same data is submitted to different Government Departments or same data is submitted in different forms to same Government Department. Duplication of compliance is as much an obstacle as having to do multiple compliance. To quote an example, at the moment, a registered private limited company (one of the most common forms of doing business in India) is required to file different information (very relevant, undoubtedly) in several different forms, each with its own deadline. Period for which this information is required to submitted is also different in each case. To top it all, the same information pie is once again bifurcated and submitted on piecemeal basis to different Departments for their individual use and records. While ultimately, these submissions help the Government in getting (almost) real time data necessary for administering important policies, but the time consumed and costs involved do not justify the end or the means. Moreover, this is against the basic principle of ease of doing business: removing obstacles to entrepreneurship.

Another hurdle which impairs smooth functioning of doing business in India is having multiple platforms for taking different permissions from the same Ministry/Department. The Government has also probably identified this hurdle and therefore has begun to merge platforms on a macro scale. To quote a recent initiative, various permissions required from Directorate General of Foreign Trade are under the process of being accessible from a single platform. But when we speak on micro scale, one still has to run from pillar to post to accomplish simple tasks, be it obtaining registrations or surrendering them.

A common solution for the above would be to have a medium for filing consolidated information. This would also mean having common period for filing information. Facilitation of intra and inter Government department transfer of information would further help the situation. This would require modelling a common platform which is accessible for all Government Departments. Also, information needs to be present in a very simple form on this platform so that same pie can be used as required by each Government Department. It goes without saying that necessary mechanism for filtering as well as sorting information is a must for such platform.

While India is slowing implementing mechanism to encourage efficiency and supporting freedom to do business which is reflected in regulatory changes brought about from time to time on different aspects of economic as well as investment activities but most of this is on a macro scale. Indian governance still needs to consider encouraging efficiency and supporting freedom at micro level. First step would be to realise the existence of ‘Management of Compliance’ as a problem. Second would be linking it with ease of doing business and from thereon taking baby steps for managing the compliance, removing one obstacle at a time.



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