A God that Failed

Ease of Doing Business (EoDB) index established by the World Bank Group evaluates countries on their ability to provide simple regulations for businesses to operate and add value to their economy. In this article, we contend that India was misled in its allegiance to false economic gods as articulated in the Avadi Resolution of 1955, which drew power from an inherent distrust of employers that manifested itself in the form of several prohibitive compliances and criminalization laws. This regulatory cholesterol encouraged informalisation and stifled the growth of high-productivity enterprises that pay high wages by combining technology, capital, and skills.

In recent years, various administrations across the country, including union ministries, state governments, and union territories have been working towards reducing compliances, doing away with criminalization, and introducing several other structural reforms to foster ease of doing business. The Jan Vishwas Bill 1.0 “tackled this with innovation, judgement, and stamina. Its innovation lay in a single law amending many laws. Its judgement lay in keeping “good” jail provisions that deter or deliver consequences for bad behaviour while eliminating “bad” jail provisions that discourage good behaviour. Its stamina lay in constructing the list of 113 “bad” jail provisions eliminated employers by asking each central ministry to reflect on their criminal provision and voluntarily surrender the bad ones.” The government also launched India’s National Single Window System (NSWS) in September 2021 to improve EoDB.

The government has wisely signalled Jan Vishwas 2.0 with higher aims to boost decriminalisation to reign in the regulatory cholesterol which prevents the rise of productive and compliant employers that are needed to tackle our biggest economic challenges. Facilitating the growth of good enterprises can lay the foundation for solving the problems of low wages, low tax-to-GDP ratio, missing middle of enterprises, demand for reservations, low labour force participation by women, financing skill development, and slow farm-to-non-farm job transition.

The stifling compliances have been instrumental in breeding corruption and encouraging informality to the extent that businesses remain smaller and less productive than they should be. It is indeed strange that a labour-abundant economy such as India is not a major producer and exporter of labour-abundant manufacturing goods. Going forward India must pave the way for higher formalisation, urbanisation, financialisation, industrialisation, and human capital by cutting itself free of the shackles of regulatory cholesterol.

Manish Sabharwal, Vice Chairman, TeamLease Services Limited makes the case for Jan Vishwas Bill Version 2.0 with a shift in policy strategy from retail to wholesale filtering after next year’s general elections to further reduce corruption and accelerate good job creation. Read the complete article here