India’s myriad laws and the web of compliances that come with it pose a growing challenge for entrepreneurs and businesses. Sharing details on these, a just released research report by Teamlease RegTech and ORF, points to the added problem of laws armed with imprisonment as a tool to control, sometimes even for inadvertent and minor lapses. It points to 26,134 specific clauses in the country’s business legislations, rules and regulations that that impose prison terms for violations. The report says if the amendments to the Companies Act, 2013 get enacted, it could be the starting point for deeper economic reforms. India’s entrepreneurial landscape, it says, is full of laws, rules, and regulations that have raised barriers to doing business. The Factories Act, 1948, for instance, read with 58 rules, contain 8,682 imprisonment clauses. This is an important law as it provides core protections to workers.

Here are some major pointers and the report and some of its recommendations:

  • There are 1,536 laws that govern doing business in India, of which 678 are implemented at the Union level.
  • There are in all 69,233 compliances, of which 25,537 are at the Union level.
  • These require 6,618 annual filings, 2,282 (34.5 percent) at the Union level and at the states, 4,336.
  • In the 12 months up to 31 December 2021, there have been 3,577 regulatory changes.
  • From January 1, 2019 to December 31, 2021, there were 11,043 changes in compliance requirements.
  • This translates to an average of 10 regulatory changes every single day.
  • Of the 1,536 laws that govern doing business in India, more than half carry imprisonment clauses.
  • Of the 69,233 compliances that these cover, 37.8 percent (or almost two out of every five) carry imprisonment clauses. More than half the clauses requiring imprisonment carry a sentence of at least one year.
  • Five states have more than 1,000 imprisonment clauses in their business laws: Gujarat (1,469 imprisonment clauses); Punjab (1,273); Maharashtra (1,210); Karnataka (1,175); and Tamil Nadu (1,043).

Source for the above data: Research Report by Teamlease RegTech and ORF. The report makes following recommendations:

  • 1. Reform the way policies are designed.
  • 2. Use criminal penalties in business laws with extreme restraint.
  • 3. Constitute a regulatory impact assessment committee within the Law Commission of India.
  • 4. Involve all independent economic regulators in compliance reforms.
  • 5. End the criminalisation of all compliance procedures.
  • 6. Create alternative mechanisms and frameworks.
  • 7. Define standards for legal drafting.
  • 8. Introduce sunset clauses.
  • 9. Reform with one legislation.
    1. Infuse dignity to entrepreneurs, businesspersons and wealth creators.