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RSTV: POLICY WATCH- EASE OF DOING BUSINESS

RSTV: POLICY WATCH- EASE OF DOING BUSINESS

POLICY_WATCH

 

Introduction:

The government is set to slash the requirements & time taken for starting a new business from 10 processes and 18 days to five processes and as many days. Ten key services, including name reservation, incorporation as well as registration for various taxes such as goods and services tax, will soon be available via two forms instead of multiple individual ones at present.

Companies soon will be able to start business in 5 days with minimal processes:

  • The government is set to slash the requirements & time taken for starting a new business from 10 process and 18 days to five processes and as many days.
  • Ten key services, including name reservation, incorporation as well as registration for various taxes such as goods and services tax, will soon be available via two forms instead of multiple individual ones at present.
  • The Ministry of Corporate Affairs will in a month unveil the two new forms — ‘Spice Plus’ and ‘Agile Pro’ — which will replace six forms currently required to avail of these services.
  • These two forms will provide access to GSTIN, PAN, TAN, ESIC, EPFO, DIN, bank accounts and professional tax.
  • The new forms will be web-based and much easier to use. The Spice Plus (incorporation form) will allow you to apply for name and incorporation in the same form besides other paservices,” the official said. Businesses will now have to register with the Employee State Insurance Corporation (ESIC) and Employees’ Provident Fund Organisation (EPFO) at the time of incorporation, the official said. Inclusion of director identification number (DIN) and registration for professional tax along with registrations of permanent account number (PAN), tax deduction and collection account number (TAN) and GST identification number (GSTIN) at the time of incorporation would greatly improve the ease of setting up a business.
  • World Bank’s latest Ease of Doing Business (EoDB) report has measured the number of days required to set up a business in India at 18, and the number of processes at 10.
  • On the World Bank’s list, India is ranked 136th out of 190 economies in the category of ease of starting a business.
  • Ease of Starting a business is just starting of ease of doing business.
  • Improving ease of doing business has been a key agenda of the government, with India climbing 14 ranks to 63rd in the latest rankings.
  • FICCI study says that large business have to folow 1900 rules and regulations and if clubbed it with states it will be 6000 rules.
  • The framework has to percolate down at state level too.

 

How to better our Ease of Doing business ranking further?

  • From 142 to 63, it is a good jump but far away from our real potential.
  • As many nations have cut down on procedures on “starting a business” to improve their rankings, India needs to make drastic changes to rank higher.
  • Coordination across all departments and between the Centre, the States and local level to get the implementation right and fast.
  • It is imperative to create awareness of the reforms introduced so that the enterprises can benefit from it.
  • Regular feedback on reforms undertaken, and ensure the reforms are implemented at the ground level.
  • Bureaucracy must continue to be an active agent of process re-engineering.
  • To secure changes in the remaining areas will require new laws, online systems and deepening the investment.
  • India’s ambition must be to become the easiest and simplest place for investors to do business in.

Problems which startups face in India:

  • Both unease of business and high cost have implications on sustainability and startups.
  • Many Indian founders have a technical background and lack business knowledge.
  • Finding the right investor and raising funds is difficult • Information gap exists between those who provide solutions and those who are supposed to use them.
  • Startups are at a disadvantage compared to large companies in terms of market penetration
  • For many job-seekers, joining a startup as an employee is not an attractive career option, due to the inherent risk that the startup might fail.
  • The present regulatory framework in which startups operate is widely seen as difficult, inefficient and unpredictable.
  • The tax policy and its enforcement are considered unfriendly for startups.
  • There is still a lack of clarity on how GST works and which items are applicable as tax base or not.

How to develop manufacturing sector?

  • Investor’s confidence must be improved.
  • Improving physical infrastructure from transport systems to the power sector is essential.
  • Importance should be given to electronic sector.
  • Improve access to finance for smaller enterprises.
  • Making firm entry and exit easier.
  • Inverted duty structure.
  • Enhancing the flexibility of labour regulations.
  • Low-cost manufacturing is important for India.
  • If India has to raise its share of manufacturing in GDP to around 25%, industry will have to significantly step up its R&D expenditure. This must be addressed by the new industrial policy.
  • The quantum of value addition has to be increased at all levels. Larger the value addition, greater the positive externalities.
  • FDI policy requires a review to ensure that it facilitates greater technology transfer, leverages strategic linkages and innovation.
  • Aim for higher job creation in the formal sector and performance linked tax incentives.
  • Attractive remuneration to motivate people to join the manufacturing sector.
  • Need to have a curriculum that focuses on soft-skills and value-based training that meets the demands of the industry.

What are the factors to attract foreign investment?

  • Regulatory framework policy needs to be predictable
  • Wage Rates
  • Labour skills
  • Tax rates
  • Transport and Infrastructure
  • Size of economy and its potential for growth
  • Political stability
  • Existence of commodities
  • Exchange rate
  • Access to free trade areas