Ease of Doing Business for MSMEs: States implementing the ease of doing business reform were eligible for additional borrowing of 0.25 percent of their Gross State Domestic Product (GSDP).
Ease of Doing Business for MSMEs: Ease of doing business reform, which included automatic renewal of business-related licences and implementation of a computerized random inspection system is of particular help to micro and small enterprises, Prime Minister Narendra Modi said on Tuesday. This was part of the four reforms undertaken by the government amid Covid aftermath to improve the ease of living for people and “particularly the poor, the vulnerable, and the middle class” and promote fiscal sustainability.
States completing ease of doing business reform required them “to ensure that renewal of business-related licences under 7 Acts is made automatic, online and non-discretionary on mere payment of fees. Another requirement was implementation of a computerized random inspection system and prior notice of inspection to reduce harassment and corruption under a further 12 Acts. This reform (covering 19 laws) is of particular help to micro and small enterprises, who suffer the most from the burden of the ‘inspector raj’,” PM Modi said in a LinkedIn blog. He added that 20 states have completed this reform and hence, were allowed additional borrowing of Rs 39,521 crores.
States implementing the reform became eligible for additional borrowing of 0.25 percent of their Gross State Domestic Product (GSDP). Accordingly, following the Department for Promotion of Industry and Internal Trade (DPIIT) recommendation, the Department of Expenditure had granted permission to these 20 States to raise the additional capital through open market borrowings. Leading states in this group of 20 included Uttar Pradesh (Rs 4,851 crore), Tamil Nadu (Rs 4,813 crore), Karnataka (Rs 4,509 crore), Gujarat (Rs 4,352 crore), Rajasthan (Rs 2,731 crore), Andhra Pradesh (Rs 2,525 crore), Telangana (Rs 2,508 crore), etc., as per the Ministry of Finance.
The government had in May last year decided to link additional borrowing permissions to states who undertook ease of doing business reforms since ease of doing business has been a critical indicator of how business-friendly government policies are in a country. However, amid Covid-led challenges, the government had on May 17, 2020, enhanced the borrowing limit of the states by 2 percent of their GSDP.
The other three citizen-centric areas for reforms identified were the implementation of the One Nation One Ration Card system, urban local body or utility reforms, and power sector reforms. Overall, 23 states availed of additional borrowings of Rs 1.06 lakh crores out of a potential of Rs 2.14 lakh crores, and consequently the aggregate borrowing permission granted to states for 2020-21 (conditional and unconditional) was 4.5 per cent of the initially estimated GSDP, PM Modi added.