Reforming labour laws, boosting flexibility in their implementation and accelerating power sector reforms can enhance ease of doing business, according to the government's policy think-tank National Institution for Transforming India (NITI) Aayog.
NITI Aayog on Monday launched the Ease of Doing Business report based on an Enterprise Survey of 3,500 manufacturing firms across all states and union territories. The survey was conducted along with the IDFC Institute, to assess the business regulations and enabling environment from the viewpoint of companies.
The report proposes reforms to facilitate doing business and creating a supportive ecosystem.
The policy think-tank, in its report, put forth its recommendation for future reforms ranging from level playing field for small, large firms, improving companies' access to finance to need to be better informed about policy changes.
Firms in labour-intensive sectors such as textiles, find compliance with labour-related regulations particularly arduous, the think tank said, adding that this leads to firms avoiding the labour-intensive sectors.
“A larger number of firms in labour-intensive sectors report that finding skilled workers, hiring contract labour, and firing employees was a major obstacle...significantly higher average time taken for environmental approvals and more days lost due to strikes and lockouts. 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,” the report said.
Similarly, facilitating power sector reforms will ensure that power-intensive companies have access to steady and uninterrupted power without undue delays or regulatory burdens, it said.
On an average, high-growth states report monthly power shortages that are ten hours less than those reported by low-growth states.
“Our results have also shown that power-intensive enterprises are most likely to be hobbled by access to power issues, and addressing this bottleneck will enhance efficiency, productivity, and job creation in crucial power-intensive sectors,” the report said.
However, action on power sector reforms would be dependent on respective states, NITI Aayog said, emphasizing on the fact that as India is increasingly becoming power surplus, states have the opportunity to use this to their advantage to lower electricity costs and making it available faster and more reliably by opening up the distribution sector for competition and improving their regulatory capacity.
The survey shows that there is a wide gap between what enterprises know and what the government officials say they have done to improve procedures related to various permits and clearances.
“Enterprises are often unaware of the single window facilities for clearances and permissions that many states have created in recent years. For instance, among start-ups, which are of recent origin, only 20 percent report using single window systems for setting up a business," it said.
Information should be communicated in a way that firms are aware of ways to ease the compliance burden of regulation, such as access to single clearance windows, and are able to yield substantial gains in productivity at relatively low costs, it suggested.
