Regulation

A “Jailed for doing business” report, from the Observer Research Foundation(ORF) and Team Lease RegTech, highlighted that thousands of business law non-compliance offenses in India carry a risk of imprisonment. Indian business regulatory framework is governed by 1,536 laws, containing 69,233 compliances of which 26,134 carried imprisonment clauses, even for minor procedural lapses.

Entrepreneurs / MSMEs are particularly burdened by this excessive and complex compliances.A typical MSME with over 150 employess could face upto 900 compliances annually costing lakhs of rupees to manage.Recognising this the Goverment has come out with the ‘Jan Vishwas Act’ which was passed in 2023 to amend minor provisions in 42 laws and convert imprisonment clauses for many lesser offenses to monetary penalities and also remove 25,000 “cumbersome” compliances, though it did not specify how many of these were criminal offenses. Even so a lot more has to done to make regulatory environment practical and business friendly.

Entrepreneurship can be encouraged by reducing the infructuous Regulatory and other Governmental requirements and controls over new start-ups for at least 5 years or till they reach a total revenue of Rs. 10 crores or profit levels of Rs. One crore, whichever is earlier, by which time they should be stable enough to carry the burden of more rigorous implementation of Rules and Regulations. Till then let their customers be their regulators by choosing to patronize them or not. After all, small enterprises have direct relations with their customers and it is only as they grow larger or begin distant marketing or even begin to export, that such direct contact becomes lesser and hence, more regulation / certification would become necessary to enable distant customers to trust the Quality. To avoid multiple counting, in trading and repairing enterprises, the value of purchases of goods and spares for resale must be deducted from the calculation of revenues, even as the taxes as applicable on the sales commission or service charges are collected.

Markets in goods and services for immediate consumption such as for – haircuts, beauty treatments, pav-bhajis, samosas and tea – work so well that it is hard to develop them so that they fail to deliver efficiency and innovation; while markets in assets are so automatically prone to booms and busts that it is hard to design them so they work at all. Speculation, herd exuberance, irrational optimism, rent seeking and the temptation of fraud, drive asset markets to overshoot and plunge – which is why they need careful regulation. Markets in goods and services need less regulation than markets in assets. Of course, goods, especially unpackaged, where the customer deals directly with the supplier need even less outside regulation, as here the customer himself acts as the regulator by directly exercising his choice to purchase or not. For other goods and services where the customer is one or more steps away from the producer and has no choice but to trust or rely on, in the stated quality of the product or in the adequacy of the qualifications of the service provider, proper Government regulation and certification is essential. (See -Annexure).

The scope for reduction in official regulatory procedures. (See – Wealth, Market Economics and Entrepreneurship- the case for).

1. An attitude of suspicion and lack of trust on our citizens has led to creation of many Laws that are cumbersome, difficult to comply with and seemingly made only with the intention to be able to find fault with, and so extract money from the entrepreneur or businessmen.
2. There should only be a single registration requirement, say GST and a single window for all other clearances. Safety and Quality control can be ensured by random checks by the concerned Authorities with an attitude of encouragement for compliance and not harassment.

Pages: 1 2 3 4