New Delhi, August 28, 2017

NITI Aayog, IDFC Institute survey stresses enhancing labour law flexibility, ensuring level playing field for small, big firms

There is a vast gap between what enterprises know and what the government officials say they have done to improve procedures related to various permits and clearances, according to a NITI Aayog and IDFC Institute enterprise survey on ‘ease of doing business’ in various Indian States.

The observation is important as the annual exercise of ranking States on the ease of doing business index carried out by the Department of Industrial Policy & Promotion (DIPP) is based on information collected from State officials in various departments and not businesses.

The survey, based on interviews with more than 3,000 enterprises across the country, also stressed on the need for greater ease of doing business for faster growth, enhancing flexibility of labour laws, accelerating power sector reforms, facilitating firm entry and exit, providing level playing field for small and large firms and improving access to finance. The survey was released by NITI Aayog on Monday,

“Enterprises are often unaware of the single window facilities for clearances and permissions that many States have created in recent years,” the survey pointed out.

For instance, among start-ups, only 20 per cent report using single window systems for setting up a business. Even among experts, only 41 per cent are aware of this facility, it said.

Commerce & Industry Minister Nirmala Sitharaman pointed out that while the World Bank only talks to some enterprises in Mumbai and Delhi while carrying out its exercise of ranking countries in the global index on ease of doing business, a similar ranking of States in India carried out by the Centre is based only on interactions with State government officials on the reforms that have been initiated. “There has to be a way to bridge this gap. While officials in the States are obviously telling the truth about the measures carried out, one has to talk to enterprises to find out if they feel they are getting benefited,” Sitharaman said at the launch of the report on Monday.

The survey also focusses on its finding of a strong association between greater ease of doing business and higher rates of growth in States.
Labour laws

On labour laws, the survey points out that reforming labour laws and achieving greater flexibility in their implementation can greatly help enhance the ease of doing business.

“According to our survey findings, firms in labour intensive sectors find compliance with labour related regulations particularly onerous. This translates into enterprises avoiding the labour intensive sectors,” the report said.

The report also makes a case for facilitating firm entry and exit. “We must reduce sclerosis in the structure of industry by encouraging the entry of new enterprises and expediting the timely and least costly exist for sick enterprises, which wish to exit,” it said.

[The Hindu Business Line]