Making India more business-friendly

A look at the impact of recent regulatory reforms and the way ahead

Recently, India climbed 30 spots to be placed at the 100th rank in the 2017-18 ease of doing business survey undertaken by the World Bank. Here’s taking a look at some recent reforms undertaken by the government and some suggestions that may be considered to make India an investment hub.

Reforms to boost business

Incorporation process: A new incorporation form SPICe (INC 32) has been introduced, which facilitates incorporation within 1-2 days. This form also facilitates obtaining tax registrations and Tax Deduction Number, and no separate applications now need to be made for PAN and TAN.

Single-window clearance: The single window system was introduced as a reform under the government’s ‘Make in India’ initiative, which mandates routing all the approvals required by an enterprise to set up a business through a common application window .

Labour law reforms: The “Unified Shram Suvidha Portal” will provide a unique identification code to all employers and will serve as a one-stop shop for compliance and inspection under almost 45 labour laws in the country.

Simplification of indirect taxation regime: TheGoods and Services Tax regime has been implemented. Also, simplified and automated procedures for various processes such as registration, returns, refunds, tax payments, have been introduced and implemented by the government.

Dealing with construction permits: India has reduced the number of procedures and time required to obtain a building permit by implementing an online system that has streamlined the process at the Municipality of New Delhi and Municipality of Greater Mumbai (which form two of India’s biggest urban centres).

Dispute resolution: The Commercial Courts, Commercial Divisions and Commercial Appellate Divisions Act of 2015 has been enacted with an intent to resolve commercial disputes in an effective and time-efficient manner. The enforcement of the Insolvency and Bankruptcy Code 2016 is another attempt to introduce global insolvency practices and quick redressal mechanism.

The establishment of the Mumbai Centre for International Arbitration for resolving disputes between different companies or individuals is another step towards establishing India as an international investment and arbitration hub.

Enforcing contracts: India has made enforcing contracts easier by introducing the National Judicial Data Grid, which makes it possible to generate case management reports on local courts. This reform applies to both Delhi and Mumbai.

The way forward

Contract enforcement is one area which India needs to improve and is the key to gaining investor confidence in India. The Enforcing Contract indicator looks at voluntary mediation/conciliation, i.e. in which the parties have an active role and voluntarily decide to initiate mediation. In this regard, the government could consider appointing a task force to evaluate whether a standalone law on mediation is required to give statutory backing to voluntary mediation.

The World Bank further observed that there is no electronic case management system for lawyers and judges in many of the competent courts at district level and that there is no provision for pre-trial conference. In addition, given that complaints cannot be filed electronically before competent courts, court documents cannot be served electronically as of now. Further, as highlighted in the recent NITI Aayog-IDFC Report (IDFC Report) on ease of doing business in India, it is imperative to create awareness of the reforms introduced so that the enterprises for whose benefit these reforms are initiated are able to avail these benefits. For example, the IDFC Report highlights that among the recently established start-ups, only 41 per cent among the experts have reported having the knowledge of the existence of the single-window facility.

One of the other findings of the IDFC Report was that labour-intensive sectors experience greater difficulty than those in capital-intensive sectors and this requires government attention and calls for regulatory reforms in this area. In this context, the proposed Model Shops and Establishments (Regulation of Employment and Conditions of Service) Bill, 2016 is a step in the right direction and should enable labour intensive industries to achieve higher productivity.

Similarly, land allotment, acquiring construction permits and obtaining construction related no objection certificates continues to take a long time.

Further, for registration of property, the critical challenge is that records related to land are spread across many departments, sub-registrar’s office, land etc and therefore requires a massive digitisation movement at the ground level.

Haigreve Khaitan is Senior Partner and Atul Pandey Associate Partner, Khaitan and Co

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