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Sep 18, 2021
4 min read

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3 Compliance Challenges, 2 Sins and 1 Point Agenda towards Ease of doing business

We all want India to be a USD 5 trillion economy. The current slowdown in the economy needs some strong reform measures. Understanding the challenges is the first step before identifying the solutions.

India is not an easy place to do business. The Make-in-India initiative is a strong component of raising growth and is focused on making India a global manufacturing hub. However, setting up a manufacturing facility in India is heavily front loaded with getting permissions, licenses, registrations and consent orders. The gestation period stretches to many months creating uncertain go-live dates, serious cost overruns and unpredictable outcomes. Clearances are required at every stage such as purchase of land, registration of property, connection of electricity and water, environment clearance, and permissions from factory inspector and pollution control boards. Once successfully established, scores of acts, thousands of compliances and hundreds of annual filings become applicable. For Make-in-India initiative to be successful, establishing and running a manufacturing company in India needs to be re-imagined.

India’s regulatory landscape leaves companies grappling with 69,233 compliances and 6,618 filings. To top that there are more than 2500 regulatory updates in a year. Handling this regulatory complexity coming at entrepreneurs from the Centre, State and local governments is a challenge for every company. The multiplicity makes compliance, deterrence and effective enforcement almost impossible. The administrative overhead increases, due to duplication in filings and returns, maintenance of registers etc. Needless to say, small companies with limited resources find that this regulatory cholesterol works as an effective barrier to growth and scale.

Given the complexity of regulatory compliance, there are 3 fundamental challenges faced by Indian businesses:

  1. Typically, companies are managing their compliances through Manual Tracking, using spreadsheets and emails to monitor internally.

  2. Often there is limited or no access to relevant Legal Updates - most companies do not even have a list of all items that they need to comply with – it is difficult, sometimes impossible, for them to track the changes that are applicable to their businesses.

  3. In-house knowledge and training is insufficient, leading to poor understanding of compliances at corporate level

This model of compliance management which is manual, paper-based and ad-hoc, leads to two sins:

  1. Sins of omission or missed compliances – documentation is not complete, filings are not made, licenses or registrations are not updated etc.

  2. Sins of commission or incorrect compliances – this includes inaccuracies in filings, incorrect calculations, incorrect forms used, delays in filing etc.

Given the increased scrutiny by the government, these sins of omission and commission are becoming increasingly costly for firms – the news headlines every day point to this trend.

If we want to achieve our goal of a $5 trillion economy, India cannot afford to continue saddling entrepreneurs and firms with heavy duty paper-work. While our Finance Minister has stated quite rightly that tax revenues need to increase, the 1 point policy agenda should be implementing the National Ease of Doing Business Policy (See TeamLease Regtech view in FE 16th July 2019: “It’s time to change the way India does business) . Reducing the compliance burden through simplification, rationalization and digitisation is the key to growth.

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