The Ease of Doing Business: It’s time to Walk the Talk

Context: While the PM recent address at India Global Week Summit showcased the country as a favorable global investment destination, India still suffers from the scourge of red tape.

Challenges due to Red Tape: often summed up as ‘Regulatory Cholesterol’, both Union and State governments are equally culpable of red-tapism leading to following issues:

• Discourage businesses: It discourages and distracts entrepreneurs from pursuing a business idea.
• Even though India ranks 63 in Ease of Doing Business 2020 report, it ranks abysmal 129 out of 190 countries in setting up a new business.
• Destroys Political Economy: Such controls foster a perfect ecosystem to breed crony-capitalism.
• Off-the-book payments make Indian units that much less competitive, both domestically and internationally.
• Heavy load of compliance: At present, companies have to annually adhere to 69,233 compliances and 6,618 filings and intimations.
• The onset of the COVID-19 pandemic has made this worse with firms having to adjust to even more than the normal (3,000 annually) regulatory changes at the district level.
• Fostered Corruption: and also left Indian businesses ill-equipped to deal with a change in regime.
• Initial attempt to establish a rules-based regime through Aadhar based subsidy delivery has worsened after the pace of change hastened recently in the form of:
• One nation one market for agricultural products.
• One nation- one ration card to access the public distribution system.
• More Pro-business changes rather than Pro-market: The former being an exception-based regime premised on the power of discretion while the latter favors competition through a rules-based regime.
• Resistance to change: The situation is coming to a head because a young, aspiration-driven society is no longer content with the status quo.

Way Forward: Litmus Test: The onset of the COVID-19 pandemic may provide opportunities for transformative reforms.

• Deployment of technology: 
• To deliver tasks, such as paying out subsidies, will eliminate middlemen;
• This process of disintermediation will destroy the enabling infrastructure of crony capitalism.
• For E.g. E-commerce platforms, such as Amazon and Flipkart, which aggregate small businesses, have got a leg-up as the rise of the fear economy in the post-COVID world.

Conclusion: In the final analysis, although India has made enormous progress in logging key milestones in the ease of doing business, this is mostly a low-hanging fruit and largely bypasses the states.