By Ease of doing business we mean how easy or difficult it is to setup and run a business which complies with all the related rules and regulations. When it comes to India it is ranked 134th by the World Bank in the DB (DOING BUSINESS) INDEX among 185 countries. In preparing DB index the World Bank measures and track changes in regulations which affect different areas of business in its life cycle and based on the analysis of these area each country is given DTF (distance to frontiers) points. The 11 areas are – starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labor market regulation. India’s current rank is 134 which is more than the average rank of south Asian countries.
When it comes to starting or setting up a business in India the major roadblock here is that a lot of clearances are required from various department and ministries. The major approvals that serve as a roadblock are environmental clearances, construction permit, industrial safety permit and power connection. The cost and time incurred in getting these clearances is much more than it should ideally be. In KPMG’s ease of doing business report 85% respondents said that time and cost taken to get such clearances is not reasonable. To overcome these barriers the government should make its eBiz portal more effective and try to integrate all the needs of a business into one portal. Sewage, water and power approval should be automated so that the time taken and cost for getting these approvals gets reduced. More banks for small and medium scale enterprises should be setup and raising funds from the current banks for SME’s like SIDBI (Small Industries Development Bank of India) should be made easier.
When it comes to running a business in India the major roadblocks here are taxation and land acquisition. In India the current land acquisition process is time consuming and costly. The average time taken to acquire land for commercial purpose is 12 months and can even be longer. This much time in land acquisition not only increases cost but also effects other business processes by slowing them down. To reduce the time in acquisition the government should create a single window for registration and mutation process. A market based pricing system should be created so that there is a win-win situation for everyone and no one feels cheated. Large industrial zones should be made which has pre-clearances that are ready to move in. Though the current government presented a new land acquisition which had many of these recommendations, it is still pending for approval by the Parliament.
The current corporate tax rate in India is 30% which is way as compared to some of our neighboring countries like china where it is 15%-25%. Higher tax rate makes India less competitive for business. Another problem is the VAT taxation system where the companies end up paying excess tax specially when the goods are manufactured in some other state and sold in some other. Though GST will solve this problem but there is still time for the GST to come.
One big change that government need to do is to try to shift from a tall structure authority to a flat structure authority so that the communication and processes can be improved. But having said that it is not an easy task to do as many changes need to be done and in some departments neither it is feasible but departments related to business should be changed so that there are no delays. The current government has taken many steps to promote business in India and to create a strong economy. Make In India is one of the big steps taken by the government. To create a better business environment should be the main aim of the government as only through the prosperity of business a better economy and a nation can be created which serves each and every one, it is high time that we strive towards becoming a developed nation from being a developing nation.
Doing business in India is not easy but it is also not so tough. Proper planning, organizing, directing and controlling are the key to success for any business or startup. In recent times we have seen small companies or startups like flipkart, ola and snapdeal becoming the big players of the market in a matter of few years only. It was all because of their ability to innovate and deliver goods and services to consumer efficiently and timely. No matter how worse the situation of an economy is if your product is reliable, innovative, reasonable and effective it will withstand any situation.
Tushit is a student at SSCBS, DU. The views expressed are his own based upon the analysis and research he did on the topic from various books, reports and web articles. He regularly writes for Corporate Monks as a research associate. The writer takes person responsibility for the ownership of the content shared and incase some sources have not been given credit, you can directly mail him firstname.lastname@example.org
- Ease of doing business in India, KPMG report
- Doing business going beyond efficiency report
- google.co.in for searches and quick facts