The Hindu Business Line, November 06, 2014

By Pradeep S Mehta

It’s not easy at all to do business. However, the Government is serious about revamping norms and instilling discipline

In spite of improving on some parameters, India has slipped down two notches in ‘Ease of Doing Business’ from 140 to 142 out of 189 countries in the last World Bank 2014 rankings report. The slide in position is also due to the fact that other countries have improved considerably since 2013.

This wake-up call has provoked the Government to respond that our rankings will improve next year as massive efforts are on to take us to the 50th position in the not so distant future. This is conflated with the ambitious programme of maximising ‘Make in India’.

The secretary in the department of industrial promotion and policy, Amitabh Kant, along with the World Bank, is leading the ‘Make in India’ campaign under the leadership of Nirmala Sitharaman, the dynamic minister. Kant is a hardworking visionary and can make some changes, at least at the Central level. He is also goading the States to carry out reforms.

Structural changes in labour laws, land acquisition laws and environmental laws are on the anvil and moving ahead as fast as they can in our governance system.

Many of the arduous procedures draw their ‘strength’ from the laws and hopefully they will be simplified or rationalised. The devil lies in the details.

In terms of starting business, Single Window Clearance has been adopted by various States. But is it functioning as well as it should? Other ministries hate to surrender their turf. An comparative assessment will help States better their performance.

Similarly, getting an electricity connection or registering properties and so on are State issues. They require a cooperative federalism type of approach to create incentives for States to attract investment. A crucial ingredient is finding the right officer to lead this exercise in each State, otherwise all good intentions will remain on paper. Of course, one needs dynamic chief ministers to goad the babus to change.

Two major issues

That leaves us mainly with two major problems. The first one is getting construction permits from city authorities, which are notorious for their uncooperative, rent-seeking ways. For this, we have among the lowest rankings in the World Bank scale. Changing laws and procedures are not sufficient to deal with the delays. We need a bonus-malus (the return of performance-related compensation upon the discovery of deficient performance) system.

The bonus will help cover the lost rents, while malus will help in fixing responsibility at the right levels. Of course, this is easier said than done, but making an effort in this direction will result in incremental changes and, hopefully, a sustaining impact.

The other major problem is in the judicial system (delay in contract enforcement), which lies beyond the executive’s domain. However, the executive could install ombudsmen to deal with investor grievances or encourage the use of an alternative dispute settlement system so that our choked up courts do not hold up the resolution of disputes.

There is a Central mission to cut down delays in the judicial system but bureaucrats are shy of hurting the sensibilities of judges.

What the Government could do is get senior lawyer-ministers such as Arun Jaitley or Ravi Shankar Prasad to engage our judges to try and improve the system. This is also critical for the common man who has to wait forever to get decisions from the courts. Quite often one sees that engaging in dialogue helps resolve even contentious issues as opposed to sending letters, organising seminars and the like. This again need not be restricted to the Central level but can be mirrored at the State and local levels, too.

Push from the Prime Minister

All these measures need a push from Prime Minister Narendra Modi himself. It also fits in well with his doctrine that India is governed by the Prime Minister and chief ministers of States.

It has to be tackled as part of the rejuvenated cooperative federalism agenda, and there are signs of reviving and restructuring the low profile Inter-State Council. This can address systemic issues, but nuts and bolts will require a radical approach rather than just one champion leading them. Even though the Government is averse to establishing new bodies, it would do well to establish regulatory reform task forces at all levels to be headed by a Cabinet minister. Such a task force can devote its time exclusively to this.

Right now, Amitabh Kant or other bureaucrats have to run their departments with a thousand routine and expedient tasks to attend to, apart from taking on these crucial larger responsibilities. The way forward for such task forces is to undertake regulatory impact analysis and share the results with the public. An enlightened public is often the best change driver.

The writer is the secretary-general of CUTS International

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