NEW DELHI: The Centre has identified eight bottlenecks in the system which need to be removed to ensure the success of Modi’s “Make in India” campaign. The government conducted a detailed exercise to identify the sectors where reforms are required immediately after Modi last month launched the campaign, rolling out a red carpet for Indian and foreign companies to encourage manufacturing.
Department of Industrial Policy & Promotion Secretary (DIPP) Amitabh Kant on Tuesday held a high-level inter-ministerial meeting to discuss the modalities before the government embarks on its ambitious agenda of reforming regulatory processes and improving India’s position in the ease-of-doing-business index from its current 134th rank to the top 50. The eight bottlenecks identified by the DIPP are related to starting a business, getting construction permits, electricity connection, registering property, paying taxes, trading across the borders, enforcing contracts and resolving insolvency.
“These reforms can be pushed only through continuous consultation, sharing of ideas and extended partnership among the departments and ministries,” DIPP Additional Secretary Shatrughna Singh said.
Starting a business in India now requires 12 procedures and at least 27 days. The reforms will usher in a one-stop mechanism for the registration processes required under all labour laws, similar to the systems in Malaysia and Singapore.
“Globally, New Zealand is the best performer in the ‘starting business’ rankings. It takes less than a day to start a business in New Zealand,” the DIPP said. The most important reform that the DIPP has proposed is in taxes. On an average, firms make 32 tax payments a year, spend 243 hours a year filing, preparing and paying taxes, and pay total taxes amounting to 62.8 percent of profits whereas in the UAE it takes only 12 hours per year and the taxes are just 14.9 percent of profits.
The DIPP has asked the Ministry of Finance to reduce the number of taxes and the frequency of payments, and to allow the online payment of taxes and the consolidation of filings.
“Expedite the implementation of the Direct Tax Code (DTC) and Goods and Service Tax (GST) and the simplification of VAT refund,” the DIPP letter stated. Even to get construction permits, companies need to deal with 35 procedures which takes a minimum of 168 days whereas the whole process is completed within 26 days in Hong Kong and China.
Also, the DIPP has asked the Ministry of Urban Development to streamline the building laws at the national and state levels by removing overlapping or contradictory building bylaws. States and local authorities are asked to evolve a composite online application process and to introduce a one-stop shop to improve coordination.
“India stands at 182 among 189 economies on the ease of dealing with construction permission,” the document states. Getting an electricity connection for a company requires seven procedures and takes a minimum of 67 days. The government wants the whole process to be cleared within 14 days.
The government also wants to simplify the process of registering properties which requires five procedures and 44 days. It has proposed online registration of properties with onsite physical verification, similar to the issuance of passports. The government also wants to increase exports and imports by reducing the number of documents required and has asked the Directorate General of Foreign Trade to allow electronic submission and processing for custom declaration. For insolvency cases, it has decided to introduce a single law.
“During the launch of “Make in India” campaign, the PM had announced that the government would initiate measures to improve India’s position in the ease-of- doing-business index and bring it from the present 134th rank into the top 50. To achieve this, the government of India along with state governments will have to initiate a series of radical measures on a war footing,” the DIPP letter adds.