Ease of Doing Business Initiatives in India

Economic activity requires facilitating and sensible rules that encourage business activities from start-up to growth phases for the business/industrial firms to flourish.  Similarly, creating distortions in the economy should be avoided. Given this supportive role of business regulations, governments are institutions are giving high priority to design business facilitating regulations.  

In India, several measures were made by the government to make business regulations simpler. Department of Industrial Policy and Promotion has chalked a number measures including making industrial license application online.

Among the various measures launched in recent years, a major step was made with the enactment of enacted Insolvency and Bankruptcy Code 2016. FDI regulations were liberalized and made simpler to attract foreign investors. The foreign trade policy 2015 has simplified export and import procedures. Implementation of the GST and restructuring of Public Private Partnership models are also expected to facilitate business environment. The startup initiative is expected to encourage new ventures by reducing procedural difficulties for starting new business.

As per the Ease of Doing Business Index of World Bank 2016 (published in October 2015), India is placed at 130 among 189 countries. Effect of these measures are visible as India became the biggest gainer in WEF’s Global Competitiveness Index. As per the 2016 report, India improved 16 places to reach 39th position out of 138 countries.

Still, business regulations continue to be distorting in nature. The NMP (National Manufacturing Policy) point out that a manufacturing unit needs to comply with nearly 70 laws and regulations on an average. Besides the multiple inspections, these units have to file sometime as many as 100 returns in a year. This kind of compliance burden discourages young entrepreneurs and they are not willing to take up an entrepreneurial role.

Government has taken several micro steps to overcome this burdensome business environment. Several applications and approvals now can be made through single window scheme, fast track mode and online format.

Following are other main steps made by the government to improve doing business environment as per Economic Survey 2016.

  • The Parliament has passed Insolvency and Bankruptcy Code 2016. This will help easy settling of corporate failure as well as to tackle defaulters.
  • The corporate tax rate for companies registered in India to go down from 30% to 25% of net profits in a phased manner over the next four years starting from 2016-17.
  • Application for Industrial License (“IL”) and Industrial Entrepreneur Memorandum (“IEM”) has simplified and made online.
  • The initial validity period of IL has been increased to three years from two years
  • The Ministry of Home Affairs (“MHA”) will grant security clearance on IL applications within twelve weeks.
  • Operationalizing the e-BIZ portal: Through eBiz portal, a business user can fill the eForms online/offline, upload the attachments, make payment online and submit the forms for processing of the department.
  • The DIPP has now adopted the new National Industrial Classification (“NIC”) 2008 instead of the old NIC 1987 for the purpose of classification for IL and IEM.
  • The number of documents required for export and import of goods are reduced from eleven to three.
  • The list of defence products requiring an IL has been issued by excluding large number of parts/ components, castings/ forgings etc. from the purview of an IL. Further, products with dual use (i.e. having military as well as civilian applications), unless classified as defence item, will also not require an IL from the defence perspective. In case of these items only an IEM has to be filed.
  • The Companies Amendment Act, 2015 (“Amendment Act”) has been passed. It removes requirements of minimum paid-up capital.
  • The MCA has introduced a simplified integrated process for incorporation of a company.
  • The process of applying for Environment and Forests clearances has been made online through MOEF portal.
  • The requirement for Environment Assessment Report is required for industrial shed, school, college, hostel for education institution, only if the built-up area is above 20,000 square meters and up to 150,000 square meters.
  • The Labour Ministry has set up a unified portal Shram Suvidha for registration of Units for Labour Identification Number, reporting of Inspection, submission of returns and grievance redressal and labour law compliance.
  • Six best practices were identified and circulated among states to grant licenses.
  • A checklist with specific time-lines for processing all applications filed by foreign investors (in cases relating to retail trading/ Non-Resident Indian / Export Oriented Units), is placed by DIPP.
  • An Investor Facilitation Cell has been created to guide, assist and handhold investors during the entire life-cycle of the business.
  • The DIPP has requested all Secretaries of Government of India and Chief Secretaries of the States/Union Territories to simplify and rationalize the regulatory environment.