Govt’s $5 trillion economy aim needs commitment to ease of setting-up business, support in early years

Updated: November 2, 2019 12:55:00 PM

Ease of Doing Business for MSMEs: The exact impact assessment of such business reforms in knowing if such reforms have essentially inculcated a healthy and easy business environment remains debatable.

Growth, Growth outlook, rate cut, December, GDP, GDP growth, SME loans, RBI, Indian economyIndia has reached 63rd position in ‘ease of doing business’, with a historic leap of 14 places in 2019.
  • By Harish Kumar

Ease of Doing Business for MSMEs: Ease of doing business – a much-glorified motto of the government of India and coined under the able leadership of Prime Minister Narendra Modi has led to several reforms in the corporate governance regime of India. While the exact impact assessment of such reforms in knowing if such reforms have essentially inculcated a healthy and easy business environment remains debatable, however, with an amount of certainty one may witness that the government has been making persistent efforts to live by its motto.

The government’s efforts broadly are two-fold, firstly, focused towards providing ease for setting-up of a business entity and providing essential support to such newly set up entities in initial years of their operations. These initiatives are mostly intended to provide the impetus to ‘Start-up India’ initiative launched parallelly by the Modi government in the year 2016 with an objective to build a robust ecosystem for Start-ups and making India a country of job/wealth creators. In this direction, the initiatives taken range from the simplification of the company registration process, liberalization of the foreign investment regulations, angel tax benefits and reduced compliances under the Companies Act, 2013 (Companies Act).

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Secondly, and more recently, the efforts have been directed towards providing a business-friendly environment to already existing entities. Rationalization of various offences (which relate to technical and procedural lapses) under the Companies Act thereby allowing such offences for in-house adjudication may be viewed as one of the major steps taken in this regard. Such de-clogging for adjudication of offences would save companies from long-drawn processes which they would have otherwise faced while presenting their case before the National Company Law Tribunal (NCLT) or special courts, which in turn, would also enable NCLT/special courts to concentrate on serious corporate offences having potential adverse bearing on public or investors interest or tantamount to fraud. Furthermore, recently a Company Law Committee has been constituted in September 2019 by the Ministry of Corporate Affairs to, inter alia, submit recommendations for re-categorization of certain offences as ‘civil wrongs’ and suggest measures with a view to further strengthen ease doing business in India.

Another significant development is the proposed codification of 44 labour laws under the four categories viz. wages, social security, industrial safety & welfare, and industrial relations, in line with the recommendations of Second National Commission on Labor. It is understood that said codification is aimed to transform old and obsolete labour laws, few of which even belong to the pre-independence era, into more accountable and transparent ones. The Code on Wages, 2019 which subsumes and replaces four different labour statutes has already been passed by both houses of parliament and awaits assent of the President.

As a testament to the above reforms, as per the recently released report of World Bank for the year 2020, India has reached 63rd position in ‘ease of doing business’, with a historic leap of 14 places in 2019, and a whopping rise of 79 places from its position in 2014. And looking at the pace of these reforms, the goal set by the government to reach at 30th spot by 2020 is not far to achieve, and these reforms collectively would act as a catalyst during achieving India’s dream of becoming $5-trillion economy by 2025.

(Harish Kumar is Partner at L&L Partners. Views expressed are the author’s own.)

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