Indian Government’s Policy on Ease of Doing Business

Share this

INTRODUCTION

The ‘ease of doing business index’ was first launched by the World Bank. It is now released every year. The basic definition of ease of doing business index is that where higher rankings indicate better, usually simpler regulations for businesses and stronger protections of property rights. India has been ranked 63rd in the Ease of Doing Business index, 2020. India has jumped from 142nd to 63rd rank in the last six years. In 2014, India was ranked 142nd in this index. This inductor index is created from ten different parameters and India has improved its rank on 6 out of 10 parameters.

Doing business in India was very difficult in the 20th century and the first decade of the 21st century. But from the second decade of the 21st century, it seems to be easier than the previous times. In the middle of the second decade, doing business in India was much easier than in previous times. The Indian government has many policies for doing business in India, both for foreign investors and Indian investors. two of the big policies for the foreign investor in India are FDI (foreign direct investment) and FII(foreign institutional investors). The Make in India policy is a nice step for doing business in India which has proved its necessity in the Indian business market. The Privatization policy has also been adopted by the government of India for doing business in India. It’s good for foreign as well as Indian investors. 

Many other policies, such as tax levied on the use of carbon-based fuel, are good steps for the businesses that use renewable energy. For promoting ‘Make in India’ policy. The government levies tax on imported goods which proved to be a good step for local production of the same goods. A high tax rate for the raw material helps to increase domestic production.

POLICIES

The government of India had started many programs for doing business in an easier way such as the Standup India, Startup India, Pradhan Mantri Mudra Yojana, I-MADE, e-Sanchit, Insolvency and Bankruptcy  Code, etc.

Stand up India

The Stand-up India program was first launched by the government of India on 5th April 2016 for the women and the SCs and STs (Scheduled Caste and Scheduled Tribes). In this scheme, banks provide alone between 10 lakh to 1 crore for the SCs, STs and the women to support them in setting up new enterprises in India. As per this program, each banks branch has to provide a loan between 10 lakh to 1 crore to at least one SC or ST and at least one woman for setting up Greenfield startups. This program is mainly used in the manufacturing and service sector and the trading sector.

Make in India

The Make in India program was first launched by the government of India on 25 September 2014, to encourage foreign companies to manufacture their goods or products in India. After the launch of the Make in India program, India was the top destination globally in 2015 for FDI (Foreign Direct Investment). Now, this seems that doing business in India is easy. The Report of the World Bank on the Make in India program had said that the Make In India was the main reason behind the high jump in ease of doing business index rank.

Startup India

The Startup India program was first launched on January 16, 2016. The Startup India program is based on funding support, incentive, hand-holding, simplification of market and industry academy partnership. Some other State Government policies such as land permission, license Raj, foreign, investment proposal and environmental clearance comes under it. To get the benefit of the Startup India program the startup headquarter must be in India, should not be in operation for more than 10 years and lastly, it should have startup health annual turnover less than  100 crores. The Startup India program has a large investment from Softbank of Japan nearly 2 billion US dollars.

Key points

  1. Improvement in insolvency and bankruptcy code.
  2. A 90-day exit window.
  3. Freedom from tex for first 3 operations.
  4. Reduction in patent registration fees.
  5. Promote India crosses the world as a startup hub.

E-Sanchit or SWIFT 

The Central board of excise and customs (CBEC) has first launched the e-Sanchit on 20th October 2017 for paperless processing uploading of supporting documentation to facilitate foreign transactions. The single-window interface for trade (SWIFT) is built to interface with agencies and institutions, reduce wastage of time and reduce the cost of doing business in India. The Reducing cost of the business is good for doing business in India and because of this many foreign investors come to India for investment.

Pradhan Mantri Mudra Yojana 

The Pradhan Mantri Mudra Yojana was first launched on 8 April 2015. The Government has planned to provide fund for those who were not earlier getting the benefit and because of this many startups to have come informal financial system and extending affordable credit

The Pradhan Mantri Mudra Yojana allows a small borrower to borrow from all Public Sector Banks, Private Sector Banks, Foreign Banks, Micro Finance Institutions(MFI) and non Banking Finance Companies for a loan up to ₹10 lakh. Any Indian citizen, who has a business plan for either non-farming sector or income-generating activity or manufacturing or processing or trading or service sector and whose credit need is less than ₹10 lakh, is eligible under Pradhan Mantri Mudra Yojana.

GOVERNMENT’s HELP IN ECOSYSTEM

Prime minister Narendra Modi has first launched a startup India scheme for small entrepreneurs. The Government has been adding entrepreneurs for a startup for growth in the country. Because of this boost in growth, the government has been planning to deploy larger funds for startups. the government had said that the development of a country must require more and more startups. The Government had launched many schemes like startup India, standup India, Pradhan Mantri Mudra Yojana, etc. The government has provided loans for new startups. The Government has released 10,000 crore funds for startups. The government has given data in the Lok Sabha and in this data the government has invested ₹2669.83 crores in 279 startups. The government has been helping from giving freedom from tax for the first three years of startup. The government had launched a mobile app name I-MADE (innovation in mobile app development ecosystem) rolled out in 2016. 

The Government has been providing a guarantee to the lenders to encourage banks for providing capital for startups. The government of India has a lot of policies for investors in the Indian market for investment and Startup. This government had started more policies than previous governments had started. Many economists talked positively about this government. They said that this government started a lot of programs which are good for the Indian market. These government policies focused on helping small startups for short term and foreign investors. The Government has provided a loan for these investors and Start-up. The government tried to attract these investors in the Indian market. And the government also started many policies like FDI, FII, make in India, etc. These  Policies look good for foreign investors.

PROBLEMS AND CONS OF POLICIES

The Indian government’s policy had a good effect on the market and made it easier to do business in India. But every policy has some pros and cons. 

The government started many programs and policies like startup India, standup India, make in India, FDI, FII, SWIFT, etc. This program has a good effect on the Indian market and foreign investors come to India for investment and also, many small Startups come in the market for investment. The government faces many problems with imposing policies and every policy has some problems and cons. One of the biggest problems is corruption. Corruption has been creating problems for the government for implementing policies.  

In the Startup India campaign where many people had started new enterprises on the name of a woman and taken a loan from banks and after taking a loan women to have not any active movement in that startup. In India, almost all the work is done with corruption. (Source to make this assertion?) In every department of government, corruption has its seat. In the Startup India campaign, where many sail companies or sail startups come in transition, which makes a lot of corruption. After taking a loan from banks, the sail startup goes out from the page and Banks faces loss. Many times Investors have faced the problem of corruption for taking a loan from banks. Many investors depend on gut-feel rather than a costly market. Investors did not do good research when planning a plan for Startup. Lack of resources price: many investors do not take profit from government policies. These investors were not good in the Indian ecosystem market and they became bankrupt. Also, they do not know about the policies made for them. and had not exited the market. The highlighted statements in blue are unclear India lacks a long term startup roadmap. Economic Liberalization is quite new to India and the government looks to keep the road map on the bank burner. India has not good policies for long term business because of this many foreign investors are afraid of investing in the Indian market. The Indian business ecosystem has not fully developed but a lot of technical ventures come in front of the entrepreneur. The enterprise does not know the technical venture and which is a big problem for the Indian economy. 

PROVISIONS IN OTHER COUNTRIES

The Indian government’s policies are good for the Indian economy and the Indian market also good for Indian and foreign investors. Top countries, in ease of doing business report, have a lot of good provisions for investors (both domestic and foreign). Some of the countries with the highest indexes are Singapore, Norway, New Zealand, the USA, Denmark, etc. Singapore has a good provision regarding new investment. One of these provisions is a simple registration process for foreign investors which is far better than the Indian registration process for foreign investors. Also, The Singapore government was good and strong commitment towards Intellectual property rights. New Zealand has ranked first out of 190 countries in the doing business report 2019. New Zealand has been offering free movement of capital in the domestic market. New Zealand offers the lowest custom tariff rate in the world. New Zealand has designed visa rules for foreign investors but in India, these visa rules have been quite difficult than New Zealand so the Indian government can implement this provision for making it easier for foreign investors. Top countries give better facilities for foreign investors who want to invest through FDI. The Indian government can implement these provisions in FDI and FII.


Vikas Vishnoi

Author

Vikas hails from National University of Study and Research in Law, Ranchi and he spends most of his time in researching and writing. His Interest area law and policy. For any clarifications, feedback, and advice, you can reach us at editor@lawcirca.com

Leave a Reply