Firms across India have a low level of awareness about the single-window system of the states for obtaining business and regulatory clearances, with only about 20 per cent of start-ups ever using such facilities, said report released on Monday by the Niti Aayog and IDFC Institute.
Noting that ease of doing business is essential for boosting growth, the report — ‘Ease of Doing Business: An Enterprise Survey of Indian States’ — said there is a need for providing more information regarding regulatory improvements, making labour laws flexible, better access to finance and easy entry and exit for firms, among others. The survey of 3,500 manufacturing firms was conducted to assess the business regulations and enabling environment across India from firms’ perspective. The survey is broader in its approach than the World Banks’ Ease of Doing Business Report and the state-level rankings put out by the commerce and industry ministry.
“The volume differs from previous efforts to document and monitor progress in the ease of doing business India in two key respects. First, it studies the business environment as viewed by enterprises instead of government officers. Second, it studies variations in perceptions across states, sectors and enterprises of different kinds,” said Niti Aayog vice chairman Arvind Panagariya. He said in future the government will analyse the state of business environment in individual states.
The survey data show low awareness among enterprises about single window systems, of states. “On average, only about 20 per cent of start-ups report using single window facilities introduced by states for setting up a business. Even among experts, only 41 per cent have any knowledge of these facilities,” it said. The report was released by commerce minister Nirmala Sitharaman along with Minister of Law & Justice and Electronics and IT, Ravi Shankar Prasad. Sitharaman said that “ease of doing business is a priority for the government” and the report will help in correcting policies.
It finds that labour-intensive sectors, that create proportionately more jobs per unit of capital investment, feel more constrained by labour regulations. “A larger number of firms in labour-intensive sectors report that finding skilled workers, hiring contract labour, and firing employees were major obstacle. The fact that enterprises in labour intensive sectors experience greater difficulty than those in capital-intensive sectors points to the need for further reform in this area.”
Higher economic activity and better performance on a range of doing business indicators are strongly correlated. “Enterprises in high-growth states are significantly less likely to report major or very severe obstacles in (i) land/construction related approvals, (ii) environmental approvals and (iii) water and sanitation availability relative to enterprises in low-growth states… firms located in high-growth states also report 25 per cent less power shortages in a typical month..,” as per the report.
Newer firms, including start-ups established after 2014, report a more favourable business environment in that they take less time in obtaining approvals than older firms, suggesting an improvement in the business environment, as per the survey. The report notes that larger firms face more regulatory barriers that smaller firms. Firms with over 100 employees took significantly longer to get necessary approvals, it said. On average, it took enterprises two years to resolve a legal dispute.