A Niti Aayog survey on ease of doing business in India has found surprising facts about Indian enterprises. Report of the survey, titled “Ease of Doing Business: An Enterprise Survey of Indian States”, reveals that awareness about single window systems, instituted by states, is very low among enterprises across India. This report is a research document that did not represent official views, the government said, dismissing some of the critical findings in the survey-based report.
The report, ‘Ease of Doing business — An enterprise survey of Indian states’, among other things, said starting a business in India took longer than that estimated by the World Bank. India’s stand is that the World Bank had not considered many of its reforms while placing the country at the 130th position in its latest ranking.
The statement drew the distinction between the methodology of the survey and that followed by the World Bank in its ease of doing business rankings.
“On average, only about 20% of start-ups, which are of recent origin, report using single window facilities introduced by state governments for setting up a business. Even among experts, only 41% have any knowledge of the existence of these facilities. Therefore, there is a clear need for creating greater awareness. In cases in which the lack of use is due to poor functioning of the service, the functioning must be improved,” the report said.
The Single window system allows businesses to complete regulatory formalities from a single location or institution. The lack of awareness about the presence of such a system in states is surprising.
90 days to obtain a construction permit and all other NOCs related to it,” it said. The World Bank ranked India poorly at 185 out of 187 countries on this parameter.
“Thus, it The Aayog said the actual experience of Indian enterprises, especially in obtaining construction permits, was better than the survey results of the World Bank’s ease of doing business report, suggesting that efforts of the Narendra Modi government to improve business environment were showing results on the ground.
“The average number of days for getting construction permit was 112 days as against 190 days according to the World Bank’s 2017 Doing Business Report. The bulk of the enterprises took 35-appears that the actual experience of enterprises is better than the survey results of the World Bank,” the Aayog said, adding that enterprises in states like Madhya Pradesh and Bihar took only 41days and 43 days, respectively, to get construction permits.
The survey comprised of 3,276 manufacturing enterprises, including 141 early stage firms. The enterprises surveyed cover 23 manufacturing sector categories. It assessed “the implications of regulations and compliance requirements for enterprises by focusing on time taken for getting various approvals, whether costs incurred in fulfilling regulatory compliances are higher than the prescribed fees and enterprises’ perceptions of how different regulatory processes impede their businesses.”
The survey also found some other surprising facts such as:
- Enterprises in high-growth states are significantly less likely to report major or very severe obstacles in land and construction related approvals, environmental approvals and water and sanitation availability as compared to enterprises located in low-growth states.
- Enterprises in high-growth states take less time on average for nearly all aspects of doing business.
- Specific areas where high-growth states do very well are in getting construction permits, labour renewals, and access to electricity and water connections.
Firms in high-growth states also report 25% less power shortage in a typical month, compared to firms in low-growth states.
Why it is difficult for firms to scale up or grow in size
- Firms with fewer employees is different from that of larger firms.Firms with over 100 employees take significantly longer to get necessary approvals than smaller firms with less than 10 employees.
- Large firms are more likely to complain that regulatory obstacles were a major impediment to doing business.
- They are also more likely to report incurring higher costs for getting necessary approvals.
- The experiences and grievances of large firms indicate that it remains very hard for firms to scale up or grow in size. This explains why firms in India are overwhelmingly small and remain small. According to latest Economic Census conducted during 2013 and 2014, a gigantic 98.6% of non-agricultural establishments had less than 10 workers.
Pointing out to the competitive federalism among states in improving the ease of doing business, the survey said the enterprises in highgrowth states were less likely to report major or very severe obstacles in land and construction-related approvals, environmental approvals and water and sanitation availability as compared to those located in low-growth states.
Enterprises in high-growth states also reported taking less time on average for nearly all aspects of doing business, especially in getting construction permits, labour renewals and access to electricity and water connections.
The survey was carried out by Niti Aayog along with along with the IDFC Institute, a Mumbai-based think tank.