Growth Through Ease of Compliance

Context: Minimizing the burden of compliance is essential for improving efficiency, productivity, and living standards.

Factors causing the burden of compliance in India:

• Size and spread of the enterprise: There are various requirements to comply with at local, state, and national levels in areas relating to economic, environmental, and public interest.
  • Including the plethora of conditions, licences/registrations, laws, rules, and compliance.
• Compliance costs in manufacturing: According to a 2013 CII-Deloitte report, the key issues are outdated requirements, unfriendly procedures, and lack of clarity in rules and legislation.
• Over-regulation and absence of ease in compliance: (highlighted by Economic Survey) will result in India’s poor performance because of delays, rent-seeking, complexity, and regulations of poor quality.
• Defective design and execution: E.g. Implementation of Goods and Services Tax (GST), Aadhar and COWIN App.
• Failure of Information Technology (IT)-systems and solutions: to design and build integrated internal IT-systems to address the issue of compliance; this is because of factors like:
  • Giving more importance to offshore projects than domestic projects.
  • Awarding government projects to lowest bidders.
  • Lack of an informed, overarching strategy and vision.

Analyzing the paradox of compliance: While India has improved its position in the World Bank’s Ease of doing business rankings (130 in 2016 to 63 in 2020; place in the top third countries), it is not reflected in compliance.

• Part of that loss (due to non-compliance and unproductivity) is the distraction of management attention from the primary responsibility of running their undertakings.
• This, subsequently, impacts most of India’s enterprises, which are small- and medium-sized.

Way forward: To reduce the compliance burden

• Move to a common market: with systematic rationalization and standardization of regulations and filings.
• Digital transformation and automation: The systems should be well designed and integrated with good quality input data.
• Attitudinal Change: “baad mei dekha jayega” (we’ll see later) attitude.
• Clean up the systems and data in digitization initiatives: Including those relating to the Aadhaar and Aarogya Setu.