India’s ‘Regulatory Cholesterol’ Still Obstructs Ease Of Doing Business
An office worker walks through a building in front of an Indiabulls Real Estate Ltd. commercial building construction site in the Lower Parel area of Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

India’s ‘Regulatory Cholesterol’ Still Obstructs Ease Of Doing Business

India's notorious red tape continues to hamper ease of doing business despite recent gains.

Businesses have to deal with a combined 1,536 acts, 69,233 compliances and make almost 7,000 filings in the country, an analysis by TeamLease, a staffing, regulatory and compliance management firm, showed. States with larger economies such as Gujarat and Maharashtra have more than 3,000 compliance requirements each.

The web of regulations comes as every authority applies its own set of norms to businesses, according to Rishi Agarwal, chief executive at Avantis Regtech, a subsidiary of TeamLease that collated the data, told BloombergQuint. This results in a number of redundant and overlapping legislation that hamper ease of doing business, he said. “Every ministry sees only their leg of the elephant. With this data analysis, we aim to show the entire elephant.”

Prime Minister Narendra Modi's administration has been trying to improve the country’s rank in the World Bank's Doing Business index. Since Modi's rise to power in 2014, India’s rank has jumped 71 places with reforms like the goods and services tax, the Insolvency and Bankruptcy Code and easier compliance to start a business. Still, significant challenges remain, particularly in areas like enforcing contracts and registering property.

Underscoring that red tape was a hurdle to thriving entrepreneurship and wealth creation, the Economic Survey of 2019-20 cited inability to enforce contracts and resolve disputes as the “single biggest constraint” to ease of doing business in India. “Given the potential economic and social multipliers of a well-functioning legal system, this may well be the best investment India can make,” it said.

Improvement in ease of doing business will also hold key to Modi's pledge of ‘Aatmanirbhar Bharat’, or Self-Reliant India. “We are now competing with the top 50 developed economies, every rank increase will require a lot of work to be put in the regulatory environment,” Agarwal said.

Agarwal cited the federal structure of GST on how to unify multiple regulations and make life easier for businesses.

A few positives came out of the analysis as well. The northeastern states have maintained a welcoming approach towards businesses, the data showed. In states such as Sikkim and Meghalaya, they don't have to put up with a barrage of regulatory compliances and filings.

Also read: What Google Data Tells Us About India’s Economic Recovery

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