President's address 2013 and the status of past promises

Jhalak - February 28, 2013

The Budget session 2013 commenced with the President, Pranab Mukherjee, addressing Parliament on February 21, 2013. The address is a statement of the policy of the government. Yesterday a Motion of Thanks was moved in the Lok Sabha and a detailed discussion took place on the President’s address. (The significance of the President’s speech has been discussed in an article published in the Indian Express.) Below are some legislative and policy items from the agenda of the central government outlined in the speech.

Amend the Prevention of Corruption Act to punish the guilty and protect the honest public servants more effectively.
The Direct Benefits Transfer system has been launched to enable government sponsored benefits such as scholarships, pensions and maternity benefits to be deposited in the beneficiaries Aadhaar linked accounts. This will be expanded to cover wages and subsidies on food and LPG. This system will not substitute public services and will be complementary to the Public Distribution System.
In a bid to promote Micro, Small & Medium Enterprises, 20% of all government procurement is required to be from Micro and Small Enterprises.
The coverage under the Mid-day Meal Programme to be expanded to pre-primary schools.
Godown storage capacity of 181 lakh tons will be created between 2013 and 2015 across the country with additional storage space of 5.4 lakh tons in the North East.
A Rural Water Supply and Sanitation Project for Low Income States, estimated at nearly Rs 5000 crore, is being developed to assist States that are lagging behind in the coverage of piped water supply.
Two and a half lakh gram panchayats will be connected with broadband facility under the National Optical Fibre Network project by December 2014.
A shift in central funding to states for higher education through a new programme called the Rashtriya Uchchatar Shiksha Abhiyan is being considered.
The government proposes to establish two new major ports at Sagar Island, West Bengal and the other in Andhra Pradesh, with a total additional capacity of around 100 Million Tonnes Per Annum (MTPA). ‘In-principle’ approval has been given for setting up an airport at Aranmula (Kerala) apart from airports at Navi Mumbai, Mopa (Goa) and Kannur (Kerela).
In 2012-13, 2600 km of roads are expected to be constructed and contracts for 3000 km of new roads are expected to be awarded. A new approach to road construction, the EPC mode, has been put in place. A length of 2900 km of highways will be put under the Operate, Maintain and Transfer system, which will improve road maintenance.

Legislative and policyagenda outlined in President’s addresses between 2009-2012 and their status

Legislation/Policy	Status
Legislations mentioned in the President’s Address between 2009-12
	To be introduced
Goods and Services Tax	Constitutional Amendment Bill introduced
The National Food Security Bill	Introduced
Amend the Land Acquisition Act and enact the Rehabilitation and Resettlement Bill	Introduced
Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Bill	Passed
The Whistleblower Bill	Pending
The Judicial Standards and Accountability Bill	Pending
The Lokpal and Lokayuktas Bill	Pending
A model Public Services Law (to cover officials providing important social services and commits them to their duties)	Two bills introduced: the Electronic Services Delivery Bill and the Citizen’s Charter Bill
The Right to Free and Compulsory Education Bill	Passed
The National Council for Higher Education Bill	Introduced
Foreign Educational Institutions Bill	Introduced
Protection of Children from Sexual Offences Bill	Passed
The Women’s Reservation Bill	Pending
The Mines and Minerals (Development and Regulation) Bill	Introduced
The Public Procurement Bill	Introduced
The General Anti-Avoidance Rules	Scheduled for 2016[1]
Amend of RTI Act (to provide for disclosure by government in all non-strategic areas)	To be introduced
Policy items mentioned in the President’s Addresses between 2009-2012
National Mission for Female Literacy – all women to be literate by 2013-14	National Literacy Mission recast in September 2009 to focus on female literacy; as per 2011 census the female literacy rate in India is 65.46%[2]
Disposal of remaining claims in 2010 under the Scheduled Tribes and Other Traditional Forest Dwellers Act	As on February 28, 2010, 27.16 lakh claims had been filed, 7.59 lakh titles had been distributed and 36,000 titles were ready for distribution;[3] as on July 31, 2012, the number of claims filed for the recognition of forest rights and titles distributed are 32.28 lakh and 12.68 lakh respectively[4]
Introduction of Minimum Support Price (MSP) for Minor Forest Produce (MFP) being considered	Based on the recommendations of the Committee constituted by Ministry of Panchayati Raj to look into aspects of MSP, Value addition and marketing of MFP in Fifth Schedule Areas, a Central Sector Scheme of MSP for MFP has been contemplated[5]
Voting rights for Indian citizens living abroad	Bill passed; NRIs can vote at the place of residence mentioned in their passport
12^th Plan target growth 9% with 4% growth for the agricultural sector	GDP grew by 5.4% and the agriculture sector by 1.8% in the first half of the current fiscal year (2012-13)
Establish national investment and manufacturing zones to promote growth in manufacturing	Under the National Manufacturing Policy, 12 National Investment and Manufacturing Zones are notified, 8 of them along the Delhi Mumbai Industrial Corridor and 4 others at Nagpur, Tumkur, Chittor and Medak
Strengthening public accountability of flagship programmes by the creation of an Independent Evaluation Office.	Government has approved setting up of an Independent Evaluation Office and the Governing Board will be chaired by Deputy Chairman, Planning Commission
Unique Identity Card scheme to be implemented by 2011-12	Bill to give statutory status pending in Parliament; enrollment until February 2013 is approximately 28 crore[6]
Establishment of National Counter-Terrorism Centre	Proposed launch of NCTC in March 2011 on hold as consultation with states is on; meeting held by the union government with the Chief Ministers of all the States in May 2012
Conversion of analog cable TV system to digital by December 2014	Government has implemented the first phase of digitization in Kolkata, Delhi, Chennai and Mumbai; by March 31, 2013, 38 cities with a population of more than one million will be covered
A roadmap for judicial reform to be outlined by the end of 2009 and implemented in a time-bound manner	Vision statement formulated in 2009 outlining road map for improving justice delivery and legal reforms and steps to reduce pendency in Courts; setting up of a National Mission for the Delivery of Justice and Legal Reforms to improve court administration and reduce pendency was approved in June 2011

*Introduced means introduced in one House; Pending means passed by one House and pending in the other House; Passed means passed by both Houses of Parliament.

[1] “Major Recommendations of Expert Committee on GAAR Accepted”, Press Information Bureau, Ministry of Finance, January 14, 2013.

[2] Lok Sabha, Starred Question No. 175, December 5, 2012, Ministry of Human Resource Development.

[3] Lok Sabha, Unstarred Question No. 2672, March 12, 2010, Ministry of Tribal Affairs.

[4] Lok Sabha, Starred Question No. 108, August 17, 2012, Ministry of Tribal Affairs.

[5] “PM approves Constitution of National Council for Senior Citizens”, Press Information Bureau, February 1, 2012, Prime Minister’s Office.

[6] https://portal.uidai.gov.in/uidwebportal/dashboard.do

Policy

Doing Business in India

Vatsal Khullar - November 1, 2017

‘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?

Table 1 (2) 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:

Starting a business: Starting a business involves obtaining clearances, and conforming to various regulations under laws such as Companies Act, 2013. The report noted that India merged the application procedure for getting a Permanent Account Number (PAN) and the Tax Account Number (TAN) for new businesses. It also improved the online application system for getting a PAN and a TAN.

Getting credit and resolving insolvency: The Insolvency and Bankruptcy Code passed in 2016 provides for a 180-day time-bound process to resolve insolvency.[3] It also provides for the continuation of a debtor’s business during these proceedings. The Code allows secured creditors to opt out of resolution proceedings, and specifies that a debtor will be immune against creditor claims during the 180-day insolvency resolution process. Prior to the passage of the Code, it took 4.3 years in India to liquidate a business (as of 2015).

Paying taxes: The report notes that India made paying taxes easier by requiring that payments to the Employees Provident Fund are made electronically.[4] Further, it introduced measures to ease compliance with corporate income tax.¹^,[5]

Trading across borders: Import border compliance at the Jawaharlal Nehru Port, Mumbai was reduced. Export and Import costs were also reduced through increasing use of electronic and mobile platforms, among others.

Enforcing contracts: The introduction of the National Judicial Data Grid has made it possible to generate case management reports on local courts.[6]

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’, 122^nd 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/.