Economic Survey 2020: Red-tape still strangles Indian manufacturing

Economic Survey 2020 updates: Ease of doing business in India seems like a far fetched dream as of now due to the huge number of licenses and approvals needed to run a business. Here's all you need to know

Did you know that manufacturing units in India have to conform to 6,796 compliance requirements? Or that you need 36 approvals to open a restaurant in Bengaluru, Delhi requires 26, and Mumbai 22? Heard about a 'Police Eating House License' that restaurants will need to operate in Delhi and Kolkata? India might have jumped up several notches in the World Bank's Ease of Doing Business Rankings in recent years, but running a business in India is anything but easy, states the Economic Survey 2019-20.

Talking about compliance requirements of the manufacturing sector, the Survey says that it is "just an illustration of the bewilderingly wide range of rules that the sector faces".

The Survey analyses the reasons why Ease of Doing Business in India is far from perfect. It compares India's performance on World Bank's EoDB rankings with its peers as well as the best-in-class with a focus on four parameters where India lags behind - Starting Business, Registering Property, Paying Taxes, and Enforcing Contracts. It concludes that there is large scope for improvement in all categories. "While it takes approximately four years to enforce a contract in India; New Zealand, Indonesia, China and Brazil require 0.6, 1.2, 1.4 and 2.2 years respectively. With a rank of 163 out of 190 nations in Enforcing Contracts, only a few countries like Afghanistan, Mozambique, and Zimbabwe perform worse than India", it points out. Similar comparisons have been shown for other categories.

The Survey also illustrates the maze of laws, rules and regulations in manufacturing and services (particularly restaurants) sector. Thus, while China and Singapore require only four licenses to open a restaurant, India requires several more mandatory licenses and approvals: Delhi requires 26, Bengaluru 36, and Mumbai 22. In addition, Delhi requires a 'Police Eating House License' from Delhi Police that asks for 45 documents compared to just 19 needed to buy a gun.

Enforcing a contract in India takes on average 1,445 days compared to 216 days in New Zealand, and 496 days in China. Paying taxes takes up more than 250 hours in India compared to 140 hours in New Zealand, 138 in China and 191 in Indonesia. These parameters provide a measure of the scope for improvement, the Survey says.

The Survey also carries a series of case studies and industry surveys to analyse the time taken at each stage of the supply chain for specific merchandise items to travel from factory gate to the warehouse of the foreign customer. It showed that there are the inordinate delays in loading and customs processes in Indian sea-ports, and the processes for imports, ironically, are better than those for exports.

Also read: Economic Survey 2020 draws heavy references from Kautilya's Arthashashtra