Vishal Sharma
Narendra Modi Government’s biggest plus so far has been that it has got the ‘business and industry’-two bad words in the previous regimes- back in focus. Has it got them any beyond that, that is, being in focus only? Well, it is hard to say at this stage based on what has been on offer. There were many expectations though from the Modi Government. Remember, immediately after this Government came to power, there was a buzz all round that it would do away with the retroactive taxation. It has not happened, albeit efforts are ongoing to rejig the existing tax architecture to gear it towards the felt needs of the businesses.
Secondly, BJP led Government was expected to have the modified land acquisition bill passed in the Parliament. There is no progress on that either. Going by the strident opposition to the bill, it does not appear that it will pass muster in the House any sooner. Thirdly, there are many things, including labour reforms, which it said it would do to help usher in business friendly atmosphere all across, but for reasons that the states and the centre have to move in tandem for them to happen, the same have not happened. And given that the present day polity of the centre and state is arrayed strongly along the ideological axis, it appears farfetched that the policy impulses of the states and centre will purposively cohere during this Government’s rule.
This is where lies the biggest danger to Make in India campaign of the central Government. Make in India campaign requires both structural and functional reforms at all levels of the G2B interface. Getting one plane right, be it structural or functional, is not going to help it attain the critical mass even though it may get it off the block. The trouble is those who have conceived it think that it will, as if it were another centrally sponsored scheme.
Manufacturing, the pivot of the Make in India campaign, is a different ball game altogether. India’s success as a great service industry hub has largely been due to the nature of the industry itself. Service sector, barring in a few cases, does not require as a prerequisite setting up of great deal of infrastructure. Having large industrial zones with assured captive power availability or connectivity to ports and railheads and airports is never an important variable in this matrix. The sector for the most part is driven by the knowledge personnel and can be owned, run and operated from the comforts of the pant houses and luxury villas, so to speak.
Manufacturing, on the other hand, is a dreadfully messy proposition and can be done predominantly in identified zones where all the necessary inputs are readily available. Establishing manufacturing zones require vast chunks of land, and that requires an enabling regulatory framework. If the enabling legislation for such acquisitions is being resisted in the Parliament, lands can’t be acquired for establishing manufacturing hubs. Land is one piece of this jigsaw puzzle though; power, roads, forward linkage with the finished goods getaways like airports/ports/railheads and backward linkage with the captive reservoirs of raw materials and labour reforms are some of the other important drivers of this sector. Progress on all of this, by all reckoning, is nothing remarkable to write home about.
Similarly, tax and legal administration governing the conduct of business also needs to be equitous and forward looking. Industry and the Government interface at many levels, but where it matters the most of all is at the level of the DICs. India sadly does not have an international approvation of its tax and legal administrative regimes. Nor does its bureaucracy enjoy much acclaim globally; it has often been dubbed as rent seekers. Isn’t then there too much to fix in India’s industrial underbelly?
While the idea behind Make in India is indisputable, the execution will suffer, if its anchoring to the ideals of rapid industrialization and navigation through the stormy waters of incoherence and rabid opposition is not sought to be overcome through the bipartisan political consensus.
One of the important structural reforms is the land acquisition bill that currently is the bugbear of all and sundry. While some of its provisions may have anti farmer slant or so it may seem, the whole bill should not be dumped just for them. In fact those provisions should be tweaked to safeguard the farmers’/landowners’ interests and both the Government and opposition should sit and talk to each other and not at each other.
Similarly, a new labour, tax and legal code, which is modeled on the internationally accepted best practices, needs to be brought before the Parliament for debate and its endorsement. It’s through the enactments that this Government will be able to invite and inspire confidence amongst the potential and the existing investors. Executive fiats and ordinances will be seen only as desperate measures of a Government in power but not in complete control. At present, a section of the Government seems to be losing the war of attrition and have started talking in terms of promulgating ordinances and issuing executive memoranda. This will get the suspecting, and they are far too many and have been so for long, to believe, and rightly so, that the reform measures being taken do not have the parliament’s backing and are reversible. This will kill the narrative of the revival of India’s growth story even before its preface has been written.
Finally, the paradigm, in the manner of speaking, has to shift at the level of the DICs for a real change to happen. Fixing timelines and reworking the processes will help up to a point. The basic sticking point is the role of the DIC itself. Is it a facilitator or a regulator? The oft repeated refrain is that DICs are facilitators and not regulators. But the trouble is that they supervise a system of so called facilitation through the framework of the regulations and checklists. They don’t have any discretionary powers nor are they supposed to depart, undershoot or overshoot the limits imposed by the framework handed to them.
The desired change will not happen unless these centres are reformed. We need to ask what is it that we want from the DICs. Does a DIC have to be a facilitator or a regulator? If it is the former, then the current functional paradigm which is more regulatory in nature has to go. DICs need to be functionally so restructured as to take out of the equation the accountability part that currently rests with it for any misdoing on the ground. The present scenario where the officers have half their minds on doing what they are doing and the other half worrying about repercussions that may follow in the event of any lapse is a veritable drag on the ease of doing business. There may be other reasons as well. They can’t endure if the other part is sorted out.
DICs should limit themselves to only advising, facilitating and authoring permissions for sale, purchase of inputs and outputs and registrations etc. on the basis of the self certified documentations from the entrepreneurs. The job of inspectorate or crosschecking whether the enterprises have actually followed up on the authorizations handed out to them should be done by an independent agency and not by DICs.
This independent agency could be entrusted with the brief of a regulator. Across all the sectors, the responsibilities of the facilitator and regulator are separately vested in two separate organizations. It’s only in the DICs that these briefs have come to overlap. In the absence of an appropriate redefining of the brief with an obvious bias towards facilitation, the DICs would not be risk averse. If there is a real intent to ease up on the rigours of starting and carrying out a business, consequential liabilities with regard to the works they are doing must be eliminated. Let them be merely district industrial facilitation centres. Once this institutional separation is done and the DICs know that that they will not have the ombudsman knocking at their doors, the actual facilitation of the industrial community will come about and doing business would be as easy as a walk in the park.
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