Making Doing Business in India Easy - Addl Inputs

Dear Friends:

This whitepaper was one of the first whitepapers we submitted in June 2014 to the PMO, Minister of Finance and Minister of Commerce.

We have seen some actions on this front with respect to Labour Reforms, Faster Company Registration process, Single Clearance Window through Make in India program. A lot remains to be done especially on the Tax and States front.

Now that the community has more than tripled in size since this whitepaper was done, we want you to review the Issues, Root Causes and Solutions below.

If you have additional inputs, please identify what you are suggesting (Issue, Root Cause or Solution) and submit your comment.

We will be compiling these comments and making an amendment to the whitepaper for submission to the Government Leaders.

I look forward to your inputs!
Rajendra Pratap Gupta

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Making Doing Business in India Easy

Key Issues Identified
1. The interaction with bureaucracy when it comes to starting/running a business is too much
2. A large amount of paperwork leads to a lot of delays and increases chances of corruption
3. Access to credit for SMEs to facilitate their expansion is very tough
4. Labour laws are rigid
5. The company registration is a tedious and a time consuming process as one has to run behind different departments to get different licenses/clearances
6. The rate of interest on bank loans for business in India is very high
7. A number of taxes like Sales tax, Central sales tax, vat, interstate sale obstacles like road permit, etc. are imposed which increases the cost of the final product, time spent on non-productive tasks and corruption
8. To set up and operate a business, even when doing everything by the book, one has to bribe various agencies to ensure things are not stalled
9. Service tax system is extremely complex with many unknowns making compliance very hard and affects a large number of people


Root Causes Identified
1. No time bound decision making or clearances
2. Requirements of EPF, ESI and Payment of Bonus Act are too stringent for MSMEs
3. Rate of interest on loans is too high. Collaterals required. This makes it tough for the budding entrepreneur to get a loan and he enters the vicious circle of the black money mongers
4. Lack of transparency and the amount of discretion the govt. employees have while granting loans, licenses, etc.
5. No Customer Service/ centricity training
6. Ambiguous laws with interpretation left to the individual in office
7. Processes are not technology driven
8. Lenient reviews and no feedback mechanism to Government


Solutions Identified
1. Greater freedom from government control on industry. The interaction with bureaucracy needs to be minimised when it comes to starting/running a business.
2. The paperwork should be done away with and the entire system should be computerised. Lesser the paper work/human interaction, lesser are the chances of corruption.
3. Easier access to credit for SMEs and labour law flexibility required in states to facilitate the expansion of small scale industries to larger ones. It will also be critical to boost employment of low skilled labour.
4. There should be a single window movement of applications for the entire gamut of registrations.
5. The rate of interest on bank loans for business in India needs to be brought down.
6. The business tax structure must be simplified - Implement GST so that the goods/services are taxed just once. No need to impose Sales tax, Central sales tax, vat, interstate sales obstacles like road permit, etc.
7. There should be a law/guideline that protects receivables of SME businesses in case of default by large companies and enables fast track recovery of outstanding payments.
8. The present labour law needs to be amended to make it more transparent for both employees and employers.
9. Uninterrupted power and an accessible police and legal support system is needed.
10. A dedicated helpline number or an electronic community for the business owners to get accurate facts and answers to general questions. more  

View all 95 comments Below 95 comments
Business should be encouraged in our country and government should help small enterprises grow in our country. more  
I am of the opinion that the following steps can ease matters: 1. A website to provide details of basic requirements 2. A single window for various approvals 3. A reasonable time limit for the officials to approve / disapprove. This turnaround time limit should be in public domain. 4. Officials dithering or dragging matters unnecessarily should be taken to task by delaying their promotions etc. 5. Such measures should work across the board all over the country. Regards S Somaskandan more  
Integration & action is missing in approach. more  
It is painful to interact with government department front office staff to submit applications, get queries answered, explain special circumstances. They only talk in terms of show-cause-notice, taking penal action etc. No common person can be perfect, business do not go perfectly, specially where human beings are involved. Hence the non-reconciliatary attitude of the inspectors is a big nightmare. They treat businessmen as criminals and theives. Hence to reduce excessive exposure to rude and un-helpful staff single window for all licences, permits and renewals should be given. Similarly all taxes should be payable more simply. Regulation and compliances are for good of employees and country, but are being used to extract/extort fees by these staff/officials. more  
A recent article stated that these days, the established banks in the country are reluctant to give loans to novice businesses since the banks have a higher risk capital requirement in these cases as they need to sustain operating losses for a safe market and chances of losses are greater for new businesses. The trust factor for larger and established businesses is greater in the view of banks and hence helps these established companies get loans easily while this is not true for the smaller ones. This is a serious deterrent to start ups in the country and needs to be fixed by providing more accessible loans at reasonable interest rates for start ups. more  
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