|Demand of the question |
Introduction. Contextual Introduction.
Body. Challenges faced by corporate sector in India. Solution to ease business environment in India.
Conclusion. Way forward.
India ranked 100th in World Bank’s Doing Business Report 2018. Although India has recently made progress in ease of doing business, doing business in India is still not easy. There are many bottlenecks faced by corporate sector in India.
Problems Faced by corporate sector in India:
- Regulatory Procedure and Related Delays: Too many regulatory measures imposed by the Government on the private sector has resulted in lengthy procedure and delays in getting final clearance of a new industrial project. On the Government level, decision making system is poor delays completion of large investment project.
- Unnecessary Control: From the beginning, the private sector of the country is subjected to unnecessary Government control. Price controls imposed by the Government on certain goods has resulted in disincentive to increase production. Rather competition among the rival producers can enlarge the production base and thereby can reduce the prices automatically. Price controls,.dual pricing etc. has resulted in black marketing and hoarding of such commodities.
- Inadequate Diversification: The private sector has been suffering from inadequate diversification as the Government did not allow them to participate in basic, heavy and infrastructural sectors like defence and railways which were earlier reserved for the public sector.
- Lack of Finance and Credit: Although the large scale industrial corporate units of the private sector are mobilising their fund from banks, development financial institutions and from the market through sale of their equities or debentures but the small scale units are facing acute problem in raising fund for their expansion. Further increase in NPA has led to decreased credit for private sector.
- Starting a business in India: It is not easy to start a business in India. It can take between months to complete all the required procedures, with fees and add-on costs dependent on the size and type of business being registered.
- Poor implementation of law: With the introduction of the Companies Act 2013, the law makers had intended to introduce a modular law to the Indian economy, but the stringent provisions led a setback to implementation. The increase in the compliance burden has, to a great extent, curbed the incorporation of companies in India.
- Land acquisition issue: Land acquisition remains complex, because of the difficulties in establishing legal ownership. There are many litigations due to inheritance, fragmented holdings, and demands by sellers to be paid in cash.
- Electricity: The demand is currently more than supply. As the economy booms, and there is a potential for power outages. Power is essential for manufacturing sector and service sectors.
- Infrastructure: There is much focus on infrastructural development, boosting road transport, creating dependable power generation, and modernising state-owned railways. An infrastructure strain poses a challenge to distribution and logistics.
- Exports and imports challenges: Despite government legislation to improve international trade, there are still various hurdles to importing and exporting goods. Exporters and investors face non-transparent and often unpredictable regulatory and tariff regimes. Several layers of bureaucracy make it challenging to move goods efficiently, and companies must file a long list of documents before moving products across borders.
- Skill gap in India: Accessing the right skills is a challenge. Further, employment laws in India are complex. At present, there is a huge variety of laws which need to be consolidated.
How India can ensure better business environment?
- Government should ease regulations.
- Tariffs should be made predictable and transparent.
- Focus should be on reducing paper work.
- Digitisation of bureaucracy and ease of opening and closing business should be focus.
- Law reforms should be initiated with aim to make labour laws and corporate laws easy and simple.
- Infrastructure investment should be increased.
- New sectors like railways and defence should be gradually opened to private sector.
- Land reforms and digitisation of land should be completed to ease land acquisition.
Although over year government has initiated many reforms and schemes to support business in India like Start-up India, Benami property act, etc. More is needed to reduce other bottlenecks to do business in India. Government should reduce hurdles and paper work wrt doing business in India.