Reforms vital to encouraging business in India

If we gauge the prospects of the Indian economy from the interest evinced by investors and domestic businesses, the future holds a lot of promise. To translate this potential into growth, we need a facilitating mechanism for the industry to thrive.

Implementing enabling business regulations assume great significance and can help actualise the 'Make in India' initiative, while broad-basing job creation, fostering transparency and attracting investments.
India is ranked overall 142 out of 189 countries in the World Bank's Ease of Doing Business Index 2015. This makes a strong pitch for regulations that are conducive to industrial growth. An urgent review of 105 archaic laws and regulations is warranted to align them better with the current business scenario.

India's restrictive labour practices have led to formal sector employment stagnating at 16%. Improving the labour market vibrancy by rationalising laws will immensely boost growth. A multitude of labour laws – 44 at the Centre and 160 at the state level, can be grouped into four categories: industrial relations, wages, employment standards and social security.

The Parliament must enact key bills like Insurance Laws (Amendment) Bill, 2008 and Factories (Amendment) Bill, 2014 during the Winter Session to reinforce its commitment to reforms and governance. Land acquisition process should be simplified by reviewing The Land Acquisition, Rehabilitation and Resettlement Act, 2013, in consultation with state governments. Land banks should be created across states to foster industrial development.

A progressive tax regime can lead to efficient resource allocation and provide a fillip to manufacturing. According to NCAER, comprehensive rollout of the GST alone can lead to 0.9-1.7% increase in GDP and 3.2-6.3% y-o-y gains in exports. Nationwide rollout of GST through a consensus with all states is thus imperative, along with a reoriented Direct Taxes Code that allays industry concerns.

According to the CAG, Rs 1 lakh crore of taxes is locked up in indirect taxes litigation. Steps to create a transparent dispute resolution mechanism like e-courts can substantially improve investor sentiment. Likewise, retrospective application of tax laws must be avoided and advance ruling mechanism for cross-border transactions should be strengthened to reassure investors.

According to UNCTAD, during 2004-13, India received net FDI inflows of $258 billion compared with $251 billion for Mexico and $1.65 trillion for China. Centre-state coordination must be improved to bring about clarity in FDI-FII policy across all sectors and help unleash India's huge potential to attract FDI.

A single-window clearance mechanism must be instituted in all states to rationalize approval process. The ongoing eBiz project of DIPP can serve as a template for adoption at the state level. The e-governance efforts should translate into projects by incorporating best practices from IT/ITeS sector to transform the way government interfaces with industry.

The people-public-private-partnership model, with its proven track record in some sectors, can be enhanced by empowering city or state agencies to authorise key projects. Similarly, the 3P entity must be utilised to implement sectoral contractual frameworks and bidding guidelines infrastructure acceleration.

The legislative reforms in India must go in tandem with the robust administrative machinery, focused on building trust, transparency, consistency and predictability in business regulations. A strong and stable policy environment will go a long way in reinvigorating the Indian economy and boosting the investor confidence.

The writer is MD & CEO, YES Bank and president, Assocham.