Reduce State-level Regulatory Cholesterol to Aid Job Creation

Context: Massive, uncoordinated and punitive regulatory cholesterol after independence made life difficult for employers. 

India's employer regulatory cholesterol includes

• Acts, Compliances and filings : 

•  About 1,536 Acts that create 69,233 compliances and 6,618 filings every year.
• 55% of the Acts, 63% of compliances, and 65 % of filings are at the levels of states.

• Labour registers: The average state has 50 different registers and 15 unique returns to be filed in a year.

Side effects of Regulatory Cholesterol:

• Breeds informal, sub-scale and uncompetitive enterprises:  India's 63 million enterprises only translate to 120 million GST registrants, and only 70,000 of these have annual revenues of more than Rs 5 crores.

• Compliance complexity compounded by geography, size and headcount

• Impact on Micro, Small and Medium Enterprises (MSME): MSMEs don't have the resources, time or skills to handle the complexity that supports red-tapism and force them to maintain "good relations".

Steps to be taken by state governments

• Rationalization: All states should form a compliance commission with a 90-day mandate to review all their compliances and filings for relevance. 

• Simplification: 

•  States need to review inspection practices and introduce risk-based, consolidated, faceless, presence-less, and digital inspection processes. 

•  For, E.g. Telangana has recently implemented such a process, which can serve as a blueprint

• Digitization: 

• They should build or upgrade existing digital platforms to ensure that no physical visit or meeting is required to conduct day-to-day business with enterprises. 
• They must also establish a common portal to publish all regulatory changes, instead of multiple portals at the department, municipal, Zila Parishad and gram panchayat levels.

Conclusion: The time and circumstances for state governments to reduce regulatory cholesterol have come; expanding formal non-farm job creation needs them to axe their excessive compliances and filings.