Shifting Gears: Advancing from ease of starting to ease of running a business

Moneycontrol, November 17, 2023 

By Pradeep S Mehta and Mehak Sharma

It is imperative to maintain high industry standards to achieve the anticipated growth rate, so that we can become a developed country by 2047, according to our policy mandarins. In the ongoing discourse, the predominant focus has revolved around simplifying the process of initiating a business.

Considerable efforts have already been undertaken to improve the Ease of Doing Business (EODB) and streamline business establishment procedures. Though many still complain, things have been better than before. What has not been addressed squarely is the ease of running a business, or as some call it cost of running a business.

The government’s determination to revitalise the business environment in the country is evident from its robust political resolve and efforts to eliminate obstacles hindering business operations. This is evident through the recently introduced Jan Vishwas Bill, which aims to remove criminal penalties associated with 183 provisions found within 42 Central Acts.

There is no doubt that the fundamental pillars of enhancing efficiency and effectiveness in business operations lie in reducing unwarranted delays, improving the formulation of laws, and enforcing accountability. However, we come across various cases in our States where guilty officers are not punished adequately by the enforcement system which includes both the bureaucracy and the judiciary. Judicial delays due to the adjournment pandemic are par for the course. Indeed, there is a governance deficit in many cases. Regrettably, India has claimed the unenviable top position in Asia for having the highest number of reported bribery cases.

Furthermore, the absence of sufficient deterrence and/or accountability has a detrimental impact on businesses, impeding their effective and smooth operation. It doesn’t matter whether the enterprise could get over the starting problems when it is unable to navigate through the maze of inspectors, while the insensitive bureaucracy and judiciary only make it worse.

The Reforms

But let’s get real here — it’s time for the next blitz of changes, and that means making sure those policymakers really step up their game and do an even better job of making it easier for enterprises to run a business by ensuring accountability and transparency. The next wave of reforms to remove structural bottlenecks must shift its attention towards creating an environment of swift inquiries and prosecution. Furthermore, by creating a bonus-malus provision for all supervisory ranks to ensure that they act against the negative, non-performing and corrupt officers and judges so that it becomes easier for businesses to operate and citizens to live. This is not to say that all enterprises work in an honest manner. Such entrepreneurs should be hauled up and denied all facilities so that they become examples for others to look down upon.

The courts are of significant importance in this whole ecosystem. They should make sure that business-related cases are managed well and get resolved quickly. States should expedite fast track commercial courts and benches in high courts, which should not only help resolve commercial disputes speedily but also punish shady business operators. This will make the judiciary, bureaucracy and business more aware of their actions and responsibilities, and hopefully stop them from doing illegal things.

The fundamental principles of accountability and deterrence must be instilled within unscrupulous bureaucrats and judges. This necessitates the implementation of punctual and ongoing performance assessments, as well as the establishment of robust oversight mechanisms. Furthermore, it is imperative to insulate bureaucrats and judges from political interference to enable them to operate with unwavering dedication and expertise, thereby fostering a business environment conducive to the nation’s welfare.

Leveraging Tech

Technology can be a big deal as it streamlines business operations, acting as a bridge between service providers and users, reducing paperwork and bureaucratic delays. It also promotes cross-sector collaboration for knowledge sharing, accountability, and transparency.

Prior to the enactment of any business-related laws, the government ought to engage in public consultations, providing clear reasons for regulations, and conducting Regulatory Impact Assessments (RIAs). The participation of industry and citizen stakeholders, particularly victims, is crucial to ensuring accountability and upholding the principles of the rule of law.

Systemic corruption exists like termites in our administration and courts. Nothing moves without paying a fixed ‘fee’. Clearly, there is a need to curb this malafide system. Good examples exist, such as in the passport system. Efforts to do similarly for land building registration systems are being made in our states.

We also need to sort out the problem of shutting down a business, especially when companies want to close voluntarily. The Insolvency and Bankruptcy Code (IBC) revamped the process of liquidating companies, but it’s not just bankruptcy; owners often shut solvent companies for personal, tech, or regulatory reasons. The Economic Survey (2020-21) and (2021-22) highlighted the lengthy process of voluntary liquidation in India.

One very big problem that we have in India is judicial delays as well as bad orders. These have to be addressed by the judiciary to set its house in order. We have been discussing this forever, and the cows have already come home waiting for their chow.

Progressive efforts to improve the business environment have been made, but it’s vital to maintain checks and balances to support a strong manufacturing foundation and smooth business operations. Achieving this necessitates collaboration between authorities, judiciary and active stakeholder involvement, aligning with participatory development principles. This is an imperative if we wish to pursue the aspiration of becoming a $30 trillion economy by 2047.

The writers work for CUTS International, a global public policy research and advocacy group. Views are personal, and do not represent the stance of this publication.

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