by Mr. P. S. Reddy, CDSL
International Anti-Corruption Day - 9 December
Industry bodies
must demand rules that are in tune with economic liberalisation.
The Aam Aadmi Party
(AAP) winning elections has raised eyebrows in the Indian polity, since it has
challenged established national parties and won on the basis of a key election
plank- elimination of corruption in
public life.
Elections all these
years were never won on real issues. Corruption being an issue that we have
lived with for decades, no national political party ever took it seriously
until it was proved wrong.
Corruption is so
endemic that its genetic code is written and embedded in public life, if not in
the labyrinthine ways of the law. Only time will tell whether the passage of
the Lokpal Bill after 45 years of its conception can cleanse the rotten system
or contributes to its decay.
Archaic processes..
Besides State laws,
today more than 1,250 Central laws govern us. These contain more the process of
executing law than the principles. Consequently, the legal frame has not kept
pace with the changing times.
And, laws that
document process only complicate doing business in India.
P. S. Reddy, CDSL |
For instance, snake
traps are to be laid in factory floors even now, failing which action could be
taken. The trap being in the rulebook, the labour officer insists on it
irrespective of the location of the factory.
Similarly, under
the Bombay Shops and Establishment Act, 1948 and the extant rules, an exemption
application under section 13 and 18 has to be approved by the labour minister
if any premise is to be kept open 24 x 7 even for internal IT system
operations, without any public service being rendered during such odd hours.
Organising a
conference for a closed business group with an evening entertainment programme
in a 5 star hotel requires the approval of district collector, police
department, electrical inspector, and traffic police.
The laws that come
into play are such obscure ones as “Licensing and Controlling places of Public
Amusement and Performance for Public Amusement including Melas & Tamashas,
1960.”
Even a brand new
lift in a building requires a certificate of the electrical inspector of labour
department for its functioning under Bombay Lift Act, 1939, which is applicable
even in National capital territory of Delhi!
Corruption
Perception Index..
No wonder, the
corruption perception index of 2013 puts India at 94 th position amongst 177
nations, while the ease of doing business index puts India at 134th position
amongst 177 nations. The truth could be worse. To change/scrap any of these
anachronistic laws or re-engineer the process, we need the support of the
political system.
A further analysis
of these two indices reveals that countries with lower levels of corruption are
easier places to do business. There are 173 countries common to the two
indices. Out of 87 countries in the first half of the corruption perception
index (those ranked as least corrupt), 69 countries are also on the top of the
index of ease of doing business.
Another 7 countries
fall in the next bracket of 10% of the countries i.e. within the first 60%.
There are only a
few countries where the relationship does not hold: the levels of corruption
are considered to be low, and yet they are not easy places to do business.
But these countries
are not economically significant, like Bhutan, Lesotho, Senegal, etc. Likewise,
there is another fringe category: countries ranked highly in terms of ease of
doing business, but with a perception of being very corrupt as well.
Here again, the
countries are not economically significant, like Kazakhstan, Belarus,
Azerbaijan and Kyrgyz Republic. An important country in this category (being
corrupt and business-friendly) is Mexico, where its rank in ease of doing
business is 53 and that of corruption is 106. Save these exceptions, low
corruption levels and ease of doing business go together.
We wake up to the
reality of how difficult it is to do business in India only when World Bank and
IFC bring out an international comparison year on year. The Ministry of Company
Affairs under the chairmanship of Mr. M.
Damodaran, former Chairman, SEBI, has constituted a committee to suggest
reforms for doing business with ease in India.
The Committee has
recommended a review of laws and regulations, framework for regulatory / or
rule making bodies, consent mechanism for lesser offences, promoting an arbitration
system for resolution of contractual disputes, and a regulation review
authority.
In the preface to
the report, it stated that “reforming the business environment has proved to be
a Sisyphean construct that governments across the globe, including India, are
rolling up the hill”, thereby acknowledging that the Governments are doing
something to improve matters, but not making much headway.
Since 2009, India’s
relative position in ease of doing business has remained in the range of 132 to
134, which confirms the belief that reforms are moving at a snail’s pace
vis-Ã -vis the reform process around the world.
The ease of doing
business report considers 10 parameters and most of these items fall within the
jurisdiction of State governments, where reforms are most needed.
The way forward..
Industry
organisations like the CII, Assocham and FICCI must identify the laws that come
in the way of ease of doing business and submit revised drafts, including the
rules and regulations for the Centre and the states to consider.
The terms of
reference of the 20th Law Commission includes identification of laws for repeal
(which are no longer needed) and identification of laws for review (which are
not in harmony with the existing climate of economic liberalisation and need
change).
Law Commission...
The Law Commission
should spend one of its terms only reviewing economic laws with the active
participation of all stakeholders. Such revision of laws should clearly
demonstrate enhancement of transparency, accountability and compliance while
ensuring checks and balances for timely delivery of services from all
government agencies.
Business and
industry associations of the country must press for passage of such laws rather
than asking for tax concessions. Crusaders against corruption, such as Anna
Hazare, must fight for fewer laws, and less bureaucracy and not more of both.
Information
technology is another potent tool that has helped many countries to move up the
ranking over the years, and it will do the same in India.
State governments
are just as responsible as the Centre for improving the climate for doing
business. Therefore, the Central government or an autonomous body may spur
reforms through a ‘state benchmarking index’ a la doing business index, without
any room for bias, political or otherwise.
(The author Mr. P.
S. Reddy is MD & CEO at CDSL. The views expressed are personal.)
No comments:
Post a Comment