GS III-Infrastructure
Context:
Excessive regulatory compliance and corruption have emerged as significant barriers to business growth in India, as highlighted in a recent The Hindu report.
Economic Consequences of Corruption
- Increased Operational Costs: Frequent demands for bribes raise the cost of doing business.
- Deterrence to Foreign Investment: Nearly 80% of foreign investors cite corruption as a major impediment to investment.
- Restricted Entrepreneurial Growth: Complex bureaucratic procedures discourage startups and small businesses.
- Slower Job Creation: Funds diverted toward bribery reduce investment in business expansion and employment.
- Inefficient Systems: Frequent changes in compliance rules disrupt operations and lower productivity.
- Damage to Global Reputation: Persistent corruption undermines India’s image as a credible business destination.
Challenges in Regulatory Compliance
- Regulatory Extortion: Authorities exploit compliance laws to demand bribes.
- Frequent Compliance Changes: Over 9,420 regulatory updates in a single year (averaging 36 per day) create confusion.
- Arbitrary Powers of Inspectors: Officials have unchecked authority to impose fines and penalties.
- Outdated Labour Laws: Despite new labour codes, their implementation remains slow and inconsistent.
Recommended Reforms
- One Nation, One Business ID: Businesses currently manage 23 different identification numbers; a unified ID would simplify compliance and curb corruption.
- Jan Vishwas 2.0 Initiative: Decriminalizing minor compliance infractions can reduce bureaucratic harassment.
- Labour Law Enforcement: States should expedite the implementation of labour reforms to facilitate ease of doing business.
- Annual Compliance Review: Regulatory bodies should adopt a predictable update system, following the FSSAI model.
- Digital Integration: A unified business ID and DigiLocker can streamline compliance processes and minimize opportunities for bribery.
- Reducing Bureaucratic Discretion: Introducing transparency and accountability in regulatory procedures is essential for an efficient governance framework.