Narendra Modi, India’s prime minister, delivers the keynote address during the IISS Shangri-La Dialogue Asia Security Summit in Singapore. (Photographer: Paul Miller/Bloomberg)

Regulatory Cost Weighs on India's CEOs as Modi Fights Corruption

(Bloomberg) -- Companies operating in India see regulatory compliance as the biggest cost overrun in the next two years, a sign that Prime Minster Narendra Modi’s efforts to curb corruption may be clashing with his plans to improve ease of doing business in Asia’s third-largest economy.

Compliance and regulatory scrutiny ranked as the biggest challenge, up from fourth position two years ago, according to a survey conducted by law firm Baker McKenzie of India’s 100 top executives of mid- to large-sized companies. The survey, released on Tuesday as part of the firm’s Doing Business Globally India Week, was conducted during November and December last year.

Regulatory Cost Weighs on India's CEOs as Modi Fights Corruption

Modi aims to take India into the top 50 countries in terms of ease of doing business. India climbed 23 places to 77 among 190 countries surveyed in the World Bank’s Ease of Doing Business 2019 rankings.

A new nationwide sales tax regime has made the movement of goods across the country easier and focus on digitization has made bribery difficult. However, there is enhanced focus on law enforcement.

“We are seeing enforcement coming out of countries where we’ve never seen before,” said Mini vandePol, Asia Pacific chair of compliance and investigations group at Baker McKenzie, in New Delhi. Companies have to now invest “real dollars and real resources” in getting compliance right, she said.

“It is not good saying I am a U.S. company and I do all the right things in the U.S,” said vandePol. “You have to do the right thing when you are in India, or in Africa.”

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