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By Pradeep S Mehta
It’s time to sweep away the
pervasive red tape that makes India one of the most
difficult places in which to do business
It’s time to sweep away the
pervasive red tape that makes India one of the most
difficult places in which to do business
The Clean India campaign can
serve as an inspiration and a metaphor. After all, we also
need to clean up the maze of regulations to enable a success
of the Make in India campaign. Both need a blitzkrieg
approach.
A web of policies, laws, rules,
regulations and variable practices, have earned India a poor
ranking of 134 out of 189 countries in the World Bank’s Ease
of Doing Business in India index. A mammoth task such as
building millions of toilets can be achieved if there is a
regulatory clean-up across all levels of government —
Central, State and local.
As with the Clean India project,
the Make in India project requires will, a national campaign
and a huge change in mindset. This includes getting rid of
fears surrounding the endeavour to industrialise, create
jobs and entrepreneurs, and ameliorate poverty.
Pervasive red tape
The strong will demonstrated by
Prime Minister Narendra Modi and supported by his ministers,
needs to percolate to the grassroots. One senior official in
the power ministry told me that he feels more energised
these days, as against in the past when he was busy
attending meetings, pushing files and watching his back.
This energy is percolating to our States and local bodies,
but in driblets. The challenge for the Central Government is
to orchestrate a sustained national campaign, handholding
the States in this endeavour. This would, in turn, involve
getting the States to handhold the local bodies.
We have set a target to increase
the share of manufacturing from 15 per cent to 25 per cent
by 2025, but there is little progress as of now. On the
other hand, our competitiveness has tumbled to 71 in 2014
from 60 among 144 countries, according to a World Economic
Forum report. On the Asian Development Bank-Economist
Intelligence Unit’s Creative Productivity Index, we are 14th
in a list of 24 economies. This report highlights the fact
that regulatory hurdles, red tape and corruption provide
little incentive to the private sector to invest in
innovation. Without innovation, there cannot be
manufacturing growth.
Other than the regulatory burden
there are issues, such as infrastructure, fiscal matters,
education, health, civil service reforms, labour, and land
and economic regulation which need to be addressed. But one
major issue is to enable entrepreneurs to start new
factories and run them without the hurdles they face on a
daily basis. For SMEs it is a huge task; big investors are
able to overcome hurdles more easily, given their deep
pockets.
We need big investment which
creates opportunities for SMEs upstream and downstream. FDI
policies are being liberalised, yet there are many hurdles.
We also need to ensure that Indian investment is
domesticated, rather than flee abroad. After the recent
Supreme Court order cancelling all captive coal mining
licences, one CEO remarked: “It is not the time to Make in
India…It’s time to run from India.”
‘Three brooms’ needed
Ease of doing business will not
improve automatically. It needs a structural revolution, and
what better way than to create a clutch of brooms to improve
the macros and clean up the red tape as well.
The first broom is to clear
reservations about trade and investment liberalisation. We
need to get into global value chains, as over 60 per cent of
international trade takes place through this route. Our
international trade is not really enmeshed into value
chains. That can happen only if we open our borders to
foreign trade and investment, and not just for our
consumption. Simultaneously, we need to strengthen our
regulatory regimes through an optimal approach rather than a
heavy-handed approach, to ensure that gains are not cornered
by a few.
The second broom, or a set of
them, would have to clean up red tape. This requires a
multi-pronged and multi-level approach. The first step is to
invite businesses and other stakeholders to share their
views on the hurdles faced by them on a website created at
the Centre and in each State and offer incentives for them
to do it. The second is to collate the same, prepare a map
and publicise the effort. The awareness generated will lead
to a mindset change. The third step is to carry out
regulatory impact assessments with cost benefit analysis of
the changes proposed. Of course, one will have to deal with
vested interests in the process.
Thinking out of the box
A business development and
reforms commission at the Centre and in the States headed by
cabinet ministers and armed with RIA instruments can push
out-of-the-box thinking and action.
The third set of brooms will be
needed to clean up the mess in our local government. For
example, India ranks very low in the area of construction
permits. Clearing this jungle will lead to better
governance. For the low ranking on contract enforcement, the
judiciary needs to be incentivised to cut the delays in
settlement of disputes.
Like drivers being the major
cause of road accidents, lawyers are mainly responsible for
judicial delays. The Chief Justice should look into the
matter.
Finally, changing mindsets will
need a campaign from the top leadership at all levels.
Indian bureaucracy lacks a sense of proportion. For
instance, allowing a used after-shave bottle of 103ml in the
hand baggage when checking in for a flight as against the
rule of 100ml will not cause a catastrophe. But to get ahead
in these areas, we need radical and structural reforms in
our civil service and systems.
The writer is the
secretary-general of CUTS International
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