Ease of doing business policy to explore scrapping of licence raj

As per the draft policy, ministries and departments will be told to assess whether licensing should be scrapped and replaced with a simple registration process

The government will soon come up with an overarching National Ease of Doing Business policy, aiming to phase out the licensing requirement for businesses.  With its target to see India in the top 50 in the World Bank’s Doing Business ranking, the Department for Promotion of Industry and Internal Trade (DPIIT) has circulated a draft Cabinet note on the proposed policy for inter-ministerial consultation.

According to the draft policy, ministries and departments will be told to assess whether licensing should be scrapped and replaced with a simple registration process. In cases where licensing requirement cannot be removed, renewal obligation should be done away with, it has suggested. Departments may even be asked to justify the frequency of renewals with reasoning. For start-ups, the compliance burden should be capped at an hour in a month, the draft policy states. In fact, each department will need to give an assessment of the time required for compliance and the cost incurred by businesses for that.

“Ministries would need to come out with a plan on how they would reduce the compliance burden in terms of cost and time,” said an official in the know. For this, monthly consultations would be undertaken between ministries and industry stakeholders.

“The policy is meant to bring together all government departments with a single objective of improving the ease of doing business environment in a comprehensive manner,’’ the official pointed out. The Union Cabinet will possibly deliberate on the policy note in July.

With the country’s economic growth on a decline and unemployment rate at a 45-year high, the initiative is expected to help boost business sentiment and create employment, it is believed. The policy objective goes beyond the idea of improving India’s ranking, according to another official. India had moved up 23 places in World Bank’s Doing Business rankings last year to 77 and it aims to break into the top 50 over the coming years.

The proposed policy is expected to help push up foreign investment. This comes at a time when India’s foreign direct investment (FDI) equity inflows have fallen for the first time in six years. In 2018-19, the FDI equity flow fell by 1 per cent to $44.4 billion.

Among other measures envisaged in the draft policy, the government would list out inspection reforms to promote self-certification and random checks. 

For instance, first-time violators will be issued only an advisory and repeated violations would invite penalties and punishment. Also, the tax departments will be asked to minimise human interface in returns assessment and scrutiny through online platforms.