The move to bring a Bill in the winter session of Parliament to decriminalise many economic offences by abolishing or amending as many as 110 provisions across 35 laws, as reported in this newspaper earlier this week, is hugely welcome. It also shows that the government is willing to walk the talk on bifurcating good-faith mistakes or omissions during the course of business from malafide, intent-driven activity. The PM had talked about how the culture of “abusing” the private sector had to end, and moving towards a ‘low/no incarceration, yet deterrent’ regime for certain offences is a step towards this. Various ministries and departments, including the department for the promotion of industry and internal trade, have either floated or are finalising proposals to lessen the compliance burden under laws outlining their jurisdiction. The ministry of statistics and programme implementation has proposed to lower the punitive burden for offences under the Collection of Statistics Act 2008. For instance, the six-month simple jail term prescribed for obstructing or deceiving statistics officers is proposed to be done away with; instead, the penalties prescribed are to be increased, from Rs 2,000 for individuals to Rs 2,000-20,000 and from Rs 10,000-1 lakh for companies.

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Meanwhile, the finance ministry is mulling making GST compliance easier, with proposals set to be brought before the GST Council that would push up the threshold for initiating prosecution for evasion and lower the charges for settling a matter outside the court. While both instances of regulatory easing need to be welcomed, the government must ensure effective deterrence is built into the system, even as the room for regulatory arbitrage and harassment of entrepreneurs shrinks. There needs to be a rigorous assessment of the potential pecuniary gains from the offences to arrive at a commensurate penalty quantum. The government needs to justify why it thinks a Rs 10,000-1 lakh fine on a company would be adequate, for instance, when the company resists statistics collection.

India, without doubt, needs to have a careful relook at its compliance landscape for business, if it expects the private sector to unleash animal spirits and remain invested in the vision of making the country $5-trillion dollar economy. A report released earlier this year, by Observer Research Foundation and TeamLease RegTech, stated that the there are 1,536 state and central laws governing doing business in India, involving 69,233 compliances. Two of every five of these compliances carry imprisonment clauses, with half in this latter pool prescribing at least a one-year prison term. These provisions are a legacy of both the colonial and the pre-liberalisation periods in India’s history. With the global competition for attracting private investment intensifying in the era of the fourth industrial revolution, India can ill-afford to remain shackled to laws that kill entrepreneurial enthusiasm. To illustrate, there are 17,819 clauses with imprisonment provisions across 352 central and state labour-related laws in the country, and the Factories Act 1948 prescribes imprisonment for, among other such ‘offences’, failure to white-wash/colour walls, ceilings, partitions, etc, of restrooms at the factory site every four months. In times of increasing automation, wouldn’t such provisions discourage businesses from hiring? The Centre has certainly done its bit with four labour Codes, but many key states are yet to catch up with the reform intent. Regulation must deter offences, not doing business.