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“India’s Reform Agenda Will Ensure Its Place In Global Value Chains”
In a conversation with BW Businessworld, Manmeet Nanda, Joint Secretary, Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce & Industry, talks about the various initiatives of DPIIT to reduce the cost of regulation, their impact on supply chains and how these initiatives are addressing challenges on the ground
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While India has seen success in the Ease of Doing Business in the last decade but on the ground, it is often said that it is not felt. What are your plans to take it forward?
India has been making a lot of strides in Ease of Doing Business since 2014, when the reform agenda was set by Prime Minister Narendra Modi. At that time, it was completely unheard of that India in the next four to five years of the ‘Doing Business Report’ would have scored anywhere and be one of the highest performing nations in the world. We were in the top bracket, all those five years in terms of improving our performance, and that jump of 79 positions we see today is because of the concerted efforts that the government put towards the reform agenda.
Since then, lot of things have happened in the reform ecosystem. The Government of India (GoI) and the DPIIT, understood that merely business reforms, as mandated by the World Bank were not enough. So, we created something unique, the Business Reform Action Plan that was rolled out from 2015 onwards.
We are in our sixth edition now and the Business Reform Action Plan looks at simple reforms that are required for both big and large businesses, and small steps that the state governments and central ministries could take to improve the business ecosystems. Though substantial work has been done so far, a lot still needs to be done. During our interactions with various stakeholders, the industry associations, we often hear about the requirement to reduce the cost of doing business. And I think our next agenda of the reform ecosystem is directed towards that and we believe that is the right step now.
DPIIT has recently started driving the reducing compliance burden exercise. Why is it important to talk about cost of regulation at this stage?
The cost of regulation is something that has been studied by many of the developing nations. While we have improved our ranking in various global indices but we realised that to get into the race of being a developed nation, we need to do what is being done everywhere, and that is measuring the cost of doing business or the cost of regulation.
Every regulation has a cost and it is very important for the government to take something that is down the path of optimal regulation. We need not over regulate, but we need not under regulate, we need to maintain and understand that there is a cost benefit required for every regulation.
If it is important to ensure that the socio-economic factors need to be looked into and that regulation is important, we go ahead with that. And if it is not, we try to reduce the cost in other processes by some kind of social or economic reengineering of the processes and that's where compliance reduction plays a very important role.
Can you illustrate an example of how this model has been successful elsewhere?
Yes, it has been adopted and about 100 countries are doing it. Most of the developed nations have adopted it. It is interesting to know and study the adoption in these countries and we have been using this time to actually look into international regulations.
A very interesting study that we came across was in Malaysia. They tried to study what are various compliances that are required for opening petrol pumps across different cities in Malaysia. They discovered that the number of compliances required were different, the cost of opening a similar kind of petrol pump was different. We have different regulations for the same business entities across different state governments.
We need to study them, we need to understand whether similar businesses can function with a lesser number of regulations, lesser number of NOCs, if we can move towards deemed approvals with longer time period between renewals, we are bringing out something which is optimal. That is how Malaysia brought down a lot of costs. So, if Malaysia can do it, why not India?
How does cost of regulation help remove real ground level challenges?
Let us take the example of medical or pharmaceutical devices. It is behest with several requirements that are presented to them by different ministries or regulators. Very interestingly while we were talking to the pharma industry, we understood that for any industry to come into place you need clearances for the building, NOCs and pollution clearances, fire clearances etc.
Now in the pharma industry, they were forced to also install sprinklers. And, if sprinklers are turned on it will create humidity in the entire factory and will spoil the entire products that are being made. But, there has to be a fire sprinkling system because that is a requirement of the NOC. Then they had to maintain that entire fire equipment system because every year the NOC has to be renewed.
So, they maintain a fire system, which they don't use, but because of the products that the industry deals with, they also have to install other fire handling systems which are CO2 based and which do not spoil their products, but because that is not an acceptable part of the NOC regulation, they need to maintain two systems and annually get that inspection done, leading to excessive costs.
This is just one example and we need to interact more with our stakeholders to understand what behests that industry and mould those requirements. The moment we start doing that, the cost will come down.
As the world moves towards the adoption of sustainable supply chains, how will cost of regulation impact the supply chain resilience in India?
It has a major role because eventually for us to be a leader, we are rolling out so many PLIs to attract the global best into our country. So, we need to make sure that our manufacturing ecosystem is as inviting because we need them to come here, set up base here and then we will be the exporters and command global supply chains.
For that, we must not only ensure that these schemes are in place, but we also need to ensure that they come in a smooth and easy manner. That is why we have rolled out the National Single Window System (NSWS) where it is a one-stop solution where they do come for investments into the country. Investors will get the information about all required clearances pertaining to central ministries and states through NSWS.
We are trying to create an entire environment, which is attractive enough for them to come in. We have made changes in the corporate law; the Companies Act has been amended. We are in the process of making amendments in the LLPs. Our FDI regime has over the years continuously become more and more encouraging and we have opened a lot more sectors in recent years. It is all because we know that we have the skill set. We have the population with the skill set, the youth population, and we do have the reform ecosystem in place, which will make us a very important player in the global value supply chains.
What will be its contribution towards Atmanirbhar and Viksit Bharat vision of the government?
The vision of ‘Viksit Bharat’ 2047, is to see India as a very important player in the global value supply chain and everything else including ‘Atmanirbharta’, which is basically working towards ‘Vocal for Local’ and manufacturing locally but globally.
This completely sums up the entire essence of the GoI and the work that the Department does for this. I think these small changes and steps that we are taking towards either cost of regulation, measuring the cost of doing business, reducing regulatory compliance burden, rationalising, simplifying, digitising things, creating the national single window are all contributing towards fulfilling the AtmanirbhartaandViksit Bharatvision of the government.