Description

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Context:

Indian businesses face hurdles due to corruption, red-tapism, and an inefficient compliance system.

Highlights of the India Business Corruption Survey 2024

66% of businesses admit to paying bribes.
54% were forced into paying bribes to expedite government processes, obtain permits, ensure compliance, or acquire duplicate licenses.
Corruption is most prevalent in sectors regulated by officials in labor, GST, income tax, pollution, provident funds, property registration, drug, and health departments.

80% of respondents in an EY-FICCI survey believe corruption deters foreign direct investment (FDI). Regulatory complexities and corruption create a trust deficit in governance.

Existing Reform Efforts

Jan Vishwas (Amendment of Provisions) Act, 2023

Decriminalized 180 provisions related to imprisonment clauses.
Reduced regulatory harassment for minor business violations.
Marked a positive step toward simplifying compliance.

Jan Vishwas 2.0 (Proposed)

Aims to decriminalize around 100 additional provisions.
Still leaves over 20,000 imprisonment clauses untouched.
Focuses on minor non-compliance issues across various laws.

Issues with Current Compliance System

Frequent Compliance Updates

9,420 compliance updates in 2024 alone (36 daily changes).
Creates confusion and opportunities for corruption.
Indicates regulatory incompetence or deliberate design to foster corruption.

Regulatory Exploitation

Inspectors misuse subjective powers to threaten factory shutdowns or imprisonment.
Businesses are often required to make unofficial payments even when compliant.
Lack of accountability in regulatory processes.

Fragmented Compliance Framework

Businesses manage 23 different identity numbers (PAN, GSTIN, CIN, etc.).
Requires excessive paperwork and frequent renewals.
Digital Public Infrastructure (DPI) remains underutilized in compliance.

The Need for a Unified 'One Nation, One Business' Identity System

Would consolidate multiple identifiers into a single digital identity.
Reduce bureaucratic friction and corruption opportunities.
Streamline regulatory interactions.
Improve India's appeal as a business destination.
Similar to successful initiatives like Digi Yatra.

Digital Transformation Opportunities

Implement tamper-proof, authenticated document repositories (Digi Locker).
Enable faster approval processes (days instead of months).
Minimize manual intervention and face-to-face interactions.
Provide automated checks and real-time tracking.

Global Context and Competition

● United States advancing governance reforms through the Department of Government Efficiency (DOGE).

● India's $4 trillion economy risks losing investments to the US's $27 trillion economy.

● Need to enhance ease of doing business to remain competitive.

● Global investors prefer jurisdictions with lower compliance risks.

Way Forward

Adopt a unified digital governance framework.
Implement National Business Identity System.
Strengthen institutional accountability and oversight.
Learn from global models like DOGE.
Prioritize a predictable regulatory environment.
Accelerate implementation of modern labor codes.

Source:

THE HINDU

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PRACTICE QUESTION

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