Study flags 26,134 legal threats to entrepreneurship

As the government takes steps to improve the ease of doing business in the country, a new study has highlighted 26,134 legal perils in India’s business laws that entrepreneurs and corporations face.

Five states have more than 1,000 imprisonment clauses in their business laws: Gujarat (1,469), Pun­jab (1,273), Mahar­a­s­htra (1,210), Karna­t­aka (1,175), and Tamil Nadu (1,043), according to a study by Observer Research Foundation and TeamLease RegTech.

Of the 1,536 laws that govern doing business in India, more than half carry imprisonment clauses. And of the 69,233 compliances that businesses have to follow, 37.8 per cent carry imprisonment clauses.

“This regulatory cholesterol has ensured that while India’s impressive aggregate gross dom­estic product (GDP), at $2.6 trillion, makes it the world’s fifth-largest economy, its GDP per capita, at $1,900, stands below Bangladesh, Syria, and Nigeria,” says the report.

“Excessive regulation has made compliance a full-time de­partment of firms, and plac­ed an unnecessary burden on mi­cro, small and medium ent­e­rprises (MSMEs). A typical MSME with more than 150 employees faces 500 to 900 compliances that cost Rs 12 lakh to Rs 18 lakh a year,” it adds.

More than half these clauses carry a sentence of at le­ast one year, says the report. Several criminalise process violations, while some punish in­advertent or minor lapses rat­her than wilful actions to cause harm, defraud, or evade. For some laws, delayed or incorrect filing of a compliance report is an offence whose punishment stands on par with sedition un­d­er the IPC, 1860.