In 2020, India ranked 63rd in World Bank’s Ease of Doing Business EODB Report out of 190 countries, leapfrogging by 14 ranks from the previous year. While international EODB rankings are provided by the World Bank, state level rankings in India for EODB (BRAP Ranking) are provided by the Department for Promotion of Industry and International Trade (DPIIT).
Even with lower investments, the contribution of Micro, Small and Medium Enterprises (MSMEs) is significant in the Indian economy. This sector plays a crucial role in the growth and development of the country and contributes a significant share in India’s GDP, employment, investments and exports.
The PHD Research Bureau of PHD Chamber of Commerce and Industry in collaboration with the Department of Commerce, Delhi School of Economics, University of Delhi, conducted a study on ‘Ease of Doing Business for MSMEs in India: Percolating EODB Reforms at Factory Level’.
The study is based on a pan India stratified random sample survey of MSMEs from manufacturing and services sectors, through a structured questionnaire on 25 parameters of ease of doing business. It was released by Sumita Dawra IAS, Additional Secretary, Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry. In a statement, she emphasised on the current macroeconomic scenario of India, as the country is the fastest growing economies in G20. She highlighted that India is at the top in smartphone data consumption, ranks second in internet usage, third in startup ecosystem and energy consumption, among others. In all these sectors, there are huge opportunities for domestic and foreign investors.
The survey was conducted for the period 2021 and responses of 5254 MSMEs were received. The results revealed that the overall MSME EODB stands at 64, of which EODB for manufacturing sector MSMEs stands at 67 and EODB for service sector MSMEs stands at 61.
MSMEs Ease of Doing Business (EODB)
Source: PHD Research Bureau, PHDCCI, MSMEs EODB Survey
The top five scoring parameters for ease of doing business of MSMEs include adoption of digitization, availability of information on business procedures and compliances, processes and procedures for starting a business, adequate power supply availability and process of tax registration and tax compliance. On the other hand, the least scoring parameters were government support for marketing, reduction in time taken to obtain credit and reduction in the overall costs of doing business.
The top five scoring parameters for ease of doing business of manufacturing sector MSMEs include:
- Adoption of digitization
- Availability of information on business procedures and compliances
- Adequate power supply availability
- Process of tax registration and tax compliance
- Availability of Infrastructure (internet, telecom and other utility).
For enhancing the ease of doing business for MSMEs, the report has suggested the following measures:
- Nodal officers for handholding- There is a need for dedicated officers for Facilitating Domestic and Foreign Companies.
- One-time registration and no license- There should be a one-time registration instead of issuing a license every year for renewal which causes a lot of time and effort.
- Merger of all 25-30 departments in a Single Window System for approval- To start a business, there should be one window clearance instead of running after 25-30 departments.
- Inspector/officials to be an Enabler, Motivator, and Guide- The inspector should be an enabler, motivator, and guide for improving the business and giving positive confidence to the investors.
- Speedy and timely Justice for litigation under GST and other laws- The various Departments should not be allowed to issue summons / notices without a valid reason. The litigation should be time-bound and speedy.
- Reservation on Local Labour- Employment should be productivity linked. Local reservation on labour must be abolished in states in order to provide justice to skilled employees if hired from outside the state. Recently, the declared “reservation policy” in Haryana is one example.
- Fixed Term Employment- Fixed-term employment provision announced by Government of India but the State should fully implement it at the ground level.
- Uninterrupted Power and Gas supply- to ensure uninterrupted power and gas supply to the industrial areas at reasonable rates.
- Decriminalisation of the minor offences will significantly improve the EODB in the Country
- Bank Financing for setting up new projects- clear cut instructions should be issued and there should not be unreasonable collateral requirement for the loans disbursed to the businesses
- Lesser compliances for MSMEs will create visible ease of doing business at the ground level and a lower tax regime will increase the personal disposable income of the people and create an overall virtuous circle of growth and development in the economy.
- PLI Scheme should include more sectors from manufacturing for the benefits of businesses/industry.
- Simplification of land acquisitions is required as it remains complex, because of the difficulties in establishing legal ownership and a ‘clean’ holding for purchase.