The Hindu Editorial Analysis
12 March 2025
More signs of overhauling the compliance framework
(Source – The Hindu, International Edition – Page No. – 6)
Topic: GS 2: Important aspects of governance, transparency and accountability
Context
- Indian businesses face challenges with compliance rules, often misused for bribes.
- Frequent changes in compliance requirements add to the struggle.
Introduction
- Corruption remains a significant barrier to business growth in India.
- Survey Findings:
- 66% of businesses report paying bribes.
- 54% feel pressured to pay bribes for government services.
- Sectors most affected include labor, GST, income tax, pollution, provident funds, property registration, and health.
Need for Stronger Compliance Reforms to Boost Investment
- Economic Impact of Corruption:
- A major deterrent to Foreign Direct Investment (FDI).
- 80% of businesses view corruption as a significant barrier.
- Emphasizes the need for a transparent regulatory system.
- Slow Progress in Compliance Reforms:
- Reforms initiated two years ago, but progress is slow.
- Jan Vishwas Act, 2023: Decriminalized 180 provisions.
- Budget 2025 and ‘Jan Vishwas 2.0’:
- Proposal to decriminalize an additional 100 provisions.
- Still, over 20,000 imprisonment clauses remain.
Challenges of Compliance and Corruption in Indian Businesses
- Key Challenges:
- Complexity of Compliance: Regulatory burdens are overwhelming and exacerbated by corruption.
- Corruption in Regulatory Approvals: Officials exploit rules to demand bribes.
- Subjectivity in Inspections: Inspectors wield unchecked power, leading to threats of imprisonment.
- Frequent Compliance Updates: 9,420 changes in the last year, averaging 36 updates daily.
- Impact of Rapid Rule Changes: Causes inefficiency, confusion, and opens doors for corruption.
- Positive Step by FSSAI: Food label regulations will now be updated annually for predictability.
- Need for Wider Reform: Other regulatory bodies should adopt FSSAI’s model for stability.
- Labour Law Reform Delays: New labour codes exist but are not yet implemented.
- Role of State Governments: Must act quickly to enforce labour law reforms effectively.
Streamlining Business Compliance Through Digital Integration
- Challenges in Setting Up a Factory: Requires numerous documents across 40+ departments, fostering inefficiency.
- Digital-First Approach Needed:
- Implement a single business identifier to simplify approvals.
- Digi Locker Concept: A secure repository for verified documents, aiming to reduce approval times significantly.
- Fragmented Compliance Landscape: Businesses navigate 23+ identity numbers, leading to bureaucratic inefficiencies.
- Proposed Solution: ‘One Nation, One Business’ Identity to streamline compliance and reduce corruption risks.
- Budget Allocation: A small investment could enhance India’s business environment and attract more investors.
A Global Perspective: India Must Act Now to Stay Competitive
- Increasing global competition for investment.
- The U.S. is implementing governance reforms to simplify business operations.
- India’s economy ($4 trillion) struggles with red tape compared to the U.S. ($27 trillion).
- Urgent action is needed to avoid losing investment and talent essential for growth.
Conclusion
- A streamlined compliance system under Jan Vishwas 2.0 is crucial for India’s economic growth.
- The government must take decisive action to attract global investors and support local entrepreneurs.
- India is at a pivotal moment; bold changes are necessary to drive progress and avoid falling behind in the global economy.