The following piece by C V Madhukar appeared in the September,2011 issue of Governance Now magazine. The debate in Parliament in response to the recent Anna Hazare led agitation demanding a strong Lok Pal Bill was a fine hour for the institution of Parliament. What was even more important about the debate is that it was watched by thousands of people across the country many of whom have lost faith in the ability of our MPs to coherently articulate their point of view on substantive issues. Of course, in many cases some of these impressions about our MPs are largely formed by what the media channels tend to project, and without a full appreciation of what actually happens in Parliament. There is now a greater awareness about an important institutional mechanism called the standing committee, and other nuances about the law making process. The Lok Pal agitation brought out another important aspect of our democracy. There are still many in India who believe that peaceful protest is a powerful way to communicate the expectations of people to the government. Our elected representatives are prepared to respond collectively when such protests are held. There is a negotiated settlement possible between the agitating citizens and our political establishment within the broad construct of our Constitution. All of this means that the safety valves in our democracy are still somewhat functional, despite its many shortcomings. But the way the whole Lok Pal episode has played out so far raises a number of important questions about the functioning of our political parties and our Parliamentary system. A fundamental question is the extent to which our elected MPs are able to ‘represent’ the concerns of the people in Parliament. It has been obvious for some time now, that corruption at various levels has been a concern for many. For months before the showdown in August, there have been public expressions of the disenchantment of the people about this problem. Even though several MPs would say privately that it is time for them to do something about it as elected representatives, they were unable to come together in a way to show the people that they were serious about the issue, or that they could collectively do something significant about the problem. The government was trying in its own way to grapple with the problem, and was unable to seize the initiative, expect for a last minute effort to find a graceful way out of the immediate problem on hand. In our governance system as outlined in our Constitution, the primary and most important institution to hold the government accountable is the Parliament. To perform this role, the Parliament has a number of institutional mechanisms that have evolved over the years. The creation of the CAG as a Constitutional body that provides inputs to Parliament, the Public Accounts Committee in Parliament, the question hour in Parliament are some of the ways in which the government is held to account. Clearly all of these mechanisms together are unable to adequately do the work of overseeing the government that our MPs have been tasked with. But it is one thing for our MPs to be effective in their role holding the government to account, and a very different thing to come across collectively as being responsive to the concerns of the people. For our MPs to play their representation role more convincingly and meaningfully there are certain issues that need to be addressed. A major concern is about how our political parties are structured, where MPs are bound by tight party discipline. In a system where the party leadership decides who gets the party ticket to contest the next election, there is a natural incentive for MPs to toe the party line, even within their party forums. This is often at the cost of their personal conviction about certain issues, and may sometimes be against what the citizens could want their representatives to do. Add to this the party whip system, under which each MP has to vote along the party line or face the risk of losing his seat in Parliament. And then of course, if some MP decides to take a stand on some issue, he needs to do all the research work on his own because our elected representatives have no staff with this capability. This deadly cocktail of negative incentives, just makes it very easy for the MP to mostly just follow the party line. If the representation function were to be taken somewhat seriously, these issues need to be addressed. The 2004 World Development Report of the World Bank was focussed on accountability. An important idea in the report was that it was too costly and inefficient for people to vote a government in and wait till the next election to hold the government accountable by voting it out for the poor governance it provides. That is the reason it is essential for governments and citizens to develop ways in which processes can be developed by which the government can be held accountable even during its tenure. The myriad efforts by government such as social audits, monitoring and evaluation efforts within government departments, efforts by Parliament to hold the government accountable, efforts of civil society groups, are all ways of holding the government to account. But over and above accountability, in an age of growing aspirations and increasing transparency, our MPs must find new ways of asserting their views and those people that they seek to represent in our Parliament. This is an age which expects our politicians to be responsive, but in a responsible way. Even as the Lok Pal Bill is being deliberated upon in the standing committee, civil society groups continue to watch how MPs will come out on this Bill. There are plenty of other opportunities where MPs and Parliament can take the initiative, including electoral reforms, funding of elections, black money, etc. It remains to be seen whether our MPs will lead on these issues from the front, or will choose to be led by others. This will determine whether in the perception of the public the collective stock of our MPs will rise or continue to deplete in the months ahead.
‘Ease of doing business’ refers to the regulatory environment in a country to set up and operate a business. Every year, the World Bank compares the business environment in 190 countries in its Ease of Doing Business Report. In its report released yesterday, India’s rank improved to 100 out of 190 countries in 2017, from its rank of 130 in the previous year.[1],[2] In this context, we explain the parameters on which each country is ranked, what has led to India’s improvement in rankings, and some recommendations made by committees to further improve the business environment in the country.
What parameters is a country ranked on?
The ease of doing business rankings are based on a country’s performance on 10 parameters such as enforcing contracts and starting a business. In India, these rankings are based on the business environment in Mumbai and Delhi. A lower rank indicates better performance on that parameter, whereas a higher rank indicates worse performance on the indicator. India’s ranking improved in six out of the 10 parameters over the previous year, while it remained the same or fell in the remaining four (see Table 1).
Note that these parameters are regulated by different agencies across the three tiers of government (i.e. central, state and municipal). For example, for starting a business, registration and other clearances are granted by central ministries such as Finance and Corporate Affairs. Electricity and water connections for a business are granted by the state electricity and water boards. The municipal corporations grant building permits and various other no objection certificates to businesses.
What has led to an improvement in India’s ease of doing business rankings?
According to the 2017 report, India introduced changes in some of these parameters, which helped in improving its ranking.1 Some of these changes include:
What are some of the other recommendations to improve the business environment in India?
Over the last few years various committees, such as an Expert Committee constituted by the Department of Industrial Policy and Promotion and the Standing Committee of Commerce, have studied the the regulatory requirements for starting a business in India and the made recommendations on the ease of doing business.[7],[8],[9] Some of the issues and recommendations made by these committees are discussed below.
Starting a business: The Standing Committee observed that regulations and procedures for starting a business are time-consuming.8 The Committee observed that as a consequence, a large number of start-ups are moving out of India and setting base in countries like Singapore where such procedures are easier. It emphasised on the need to streamline regulations to give businesses in India a boost. Note that the government announced the ‘Start-up India Action Plan in January 2016.[10] The 19-point plan identified steps to simplify the process for registering and operating start-ups. It also proposed to grant tax exemptions to these businesses.
The Committee had suggested that the procedures and time period for registration of companies should be reduced. In addition, a unique business ID should be created to integrate all information related to a debtor. This ID should be used as sole reference for the business.
Acquiring land, registering property: Under the current legal framework there are delays in acquiring land and getting necessary permissions to use it. These delays are on account of multiple reasons including the availability of suitable land and disputes related to land titles. It has been noted that land titles in India are unclear due to various reasons including legacy of the zamindari system, gaps in the legal framework and poor administration of land records.[11]
The Standing Committee observed that the process of updating and digitising land records has been going on for three decades. It recommended that this process should be completed at the earliest. The digitised records would assist in removing ambiguity in land titles and help in its smooth transfer. It also suggested that land ownership may be ascertained by integrating space technology and identification documents such as Aadhaar. Note that as of September 2017, land records had been linked with Aadhaar in 4% of the villages across the country.[11]
Several states have taken steps to improve regulations related to land and transfer of property.8 These steps include integration of land records and land registration by Andhra Pradesh and Gujarat, and the passage of a law to certify land titles in urban areas by Rajasthan. The Committee also recommended creating a single window for registration of property, to reduce delays.8
Construction permits: In India, obtaining construction permits involves multiple procedures and is time consuming. The Standing Committee had observed that it took 33 procedures (such as getting no objection certificates from individual departments) over 192 days to obtain a construction permit in India.8 On the other hand, obtaining a similar permit in Singapore involved 10 procedures and took 26 days.
Taxation: The Standing Committee had noted that the tax administration in India was complex, and arbitration proceedings were time-consuming. It observed that the controversies on the Minimum Alternate Tax on capital gains and the tax disputes with companies like Vodafone and Shell had harmed India’s image on taxation matters. Such policy uncertainty and tax disputes have made foreign companies hesitant to do business in India.8
The Committee observed that for ‘Make in India’ to succeed, there is a need for a fair, judicious and stable tax administration in the country. Further, it suggested that to reduce harassment of tax payers, an electronic tax administration system should be created.8 Such a system would reduce human interface during dispute resolution. Note that the Goods and Services Tax (GST) was introduced across the country from July 1, 2017. The GST framework allows for electronic filling of tax returns, among other measures.[12]
Enforcing contracts: Enforcing contracts requires the involvement of the judicial system. The time taken to enforce contracts in India is long. For instance, the Standing Committee noted that it took close to four years in India for enforcing contracts. On the other hand, it took less than six months for contract enforcement in Singapore. This may be due to various reasons including complex litigation procedures, confusion related to jurisdiction of courts and high existing pendency of cases.8
The Standing Committee recommended that an alternative dispute resolution mechanism and fast track courts should be set up to expedite disposal of contract enforcement cases. It suggested that efforts should be made to limit adjournments to exceptional circumstances only. It also recommended that certified practitioners should be created, to assist dispute resolution.8
[1] ‘Doing Business 2018’, World Bank, http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Annual-Reports/English/DB2018-Full-Report.pdf.
[2] ‘Doing Business 2017’, World Bank, http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Annual-Reports/English/DB17-Full-Report.pdf.
[3] Insolvency and Bankruptcy Code, 2016, http://www.prsindia.org/billtrack/the-insolvency-and-bankruptcy-bill-2015-4100/.
[4] G.S.R. 436 (E), G.S.R. 437 (E) and G.S.R. 438 (E), Gazette of India, Ministry of Labour and Employment, May 4, 2017, http://labour.gov.in/sites/default/files/Notifications%20for%20amendment%20under%20EPF%2C%20EPS%20and%20EDLI%20Schemes%20for%20e-Payment_0.pdf.
[5] Finance Bill, 2017, http://www.prsindia.org/billtrack/the-finance-bill-2017-4681/; Memorandum explaining the provisions of the Finance Bill, 2017, http://unionbudget.nic.in/ub2017-18/memo/memo.pdf.
[6] National Judicial Data Grid, http://njdg.ecourts.gov.in/njdg_public/index.php.
[7] Report of the Expert Committee on Prior Permissions and Regulatory Mechanism, Department of Industrial Policy Promotion, February 27, 2016.
[8] ‘Ease of Doing Business’, 122nd Report of the Department Related Standing Committee on Commerce, December 21, 2015, http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20Commerce/122.pdf.
[9] Ease of Doing Business: An Enterprise of Survey of Indian States, NITI Aayog, August 28, 2017, http://niti.gov.in/writereaddata/files/document_publication/EoDB_Single.pdf.
[10] Start Up India Action Plan, January 2016, http://www.startupindia.gov.in/pdffile.php?title=Startup%20India%20Action%20Plan&type=Action&q=Action%20Plan.pdf&content_type=Action&submenupoint=action.
[11] Land Records and Titles in India, September 2017, http://www.prsindia.org/parliamenttrack/analytical-reports/land-records-and-titles-in-india-4941/.
[12] The Central Goods and Services Tax Act, 2017, http://www.prsindia.org/billtrack/the-central-goods-and-services-tax-bill-2017-4697/.
