This article is written by Divya Kathuria, a student of Raffles University.
What is “Make in India”?
Most of us are enthusiastically discussing about the ‘make in India’ scheme, may be, because we rarely get to see any product with such wordings on it and we undoubtedly crave to see this as being Indians. But, actually, all of us barely know about what it actually is, except that it is the new scheme launched by Modi Government to make endeavors to encourage and increase manufacturing in India itself instead of importing. The official website of make in India campaign displays its homepage defining the campaign as short as possible- “A Major new National Program. Designed to facilitate investment. Foster innovation. Enhance Skill development. Protect Intellectual property. And Build Best-in-class manufacturing infrastructure. There’s never been a better time to MAKE IN INDIA.”[1] The attractive term was coined by Mr. Narendra Modi and was formally launched on September 25, 2014 after hinting towards this initiative on Independence Day of the same year.
What is meant by ‘ease of doing business’ ?
‘Ease of doing business’, as the term itself says all means how easily one can start up a business in India that is, how many formalities he has to go through or what are the impediments that the investors face while starting up. There is an ‘ease of doing business’ index given by World Bank every year. One of the impediment investors have always faced while doing any business in India that procedure is too difficult and generally requires a very long approval process. Unfortunately, India’s ranking on the World Bank’s ‘Ease of Doing Business Index’ has remained more or less stagnant, in the 130s and 140s, over the last few years in a list of 189 countries.[2] India has been ranked142nd on the Ease of Doing Business Index and 158th on Ease of Starting a Business. And it is a delight for the investors because one of the key highlight and object of this scheme is to make it easier to do business in India to facilitate ‘make in India’. The government is taking several steps to bring India into the top 50 ranks.
How easing business will boost ‘make in India’?
There is an obvious and direct relation between ‘ease of doing business’ and ‘make in India’. It is quite obvious that if more difficult it is to achieve something, more reluctant people will be to go for it. Similar is the case with business. Investors are often resisted towards starting up any business in India because it includes various impediments. So, by removing such impediments and making it easier to do business here will naturally attract the investors who were earlier resistant to invest in India thus, boosting ‘Make in India’.
Steps taken by government to make doing and starting up of business easier:-
- INC-29
INC-29 gives a fast track procedure for registering any company in India. To simplify and fast track the procedure for company registration in India, the Ministry of Corporate Affairs (MCA) has introduced Form INC-29 – Integrated Incorporation Form. Form INC-29 Company Registration has merged the process of getting Director Identification Number (DIN), Name Approval and Incorporation application into one single process – thereby significantly reducing the time taken to start a company in India. The INC-29 form can be accessed through http://www.mca.gov.in/MinistryV2/Download_eForm_choose.html.
Earlier 8 forms had to be filled for getting the company registered. As the entire process of incorporation is in a single form, correct filing could mean an approval in 48 hours, that is what government has claimed. If the form is rejected then you can apply for refund through Refund Form. Also, one can apply for PAN- Permanent Account Number and Tax Deduction Account Number-TAN.
INC-29 will provide following services through a single e-form:
- Allotment of DIN-Director Identification Number
- Name of a company
- Incorporation of a company
However, it has certain disadvantages too. One of these is that it has narrower name proposal. Earlier, 6 names(of applicants) in order of priority could be submitted whereas INC-29 allows only single name to be submitted. And on top of that, in case the name applied is rejected, then there is only one single chance left for re-submission and it is unclear as what would follow the second rejection
Another point worth noting here is that it has combined various forms but, earlier procedure has yet not been eliminated. It is just that you now submit everything at once which would mean that if there are errors, one will get to know about them at once. The change is good until we come to know that only a single re-submission is allowed before one needs to fill the entire form once again and paying Rs. 2000 once again.
Further, Section 8 of the Companies Act, 2013 has not been included which includes incorporation of a charitable company and company defined under Chapter XXI are also not facilitated under this new system. Maximum DIN allotment is just 3 in number that is, DIN for only 3 directors can be applied at one time which is another shortcoming of the new system.
- Easing of trading across border component of ‘ease of doing business’
India has been ranked 126th in Trading Across Borders component of “Ease of Doing Business”, out of 189 countries ranked by the World Bank in its 2015 Report. This year, there has been reduction of number of documents to only three in number from around ten for imports and exports of goods. After issue of the DGFT’s Notification[3] dated 12-3-2015, only three documents each would be mandatory documents for export and import.[4] Mandatory documents required for export of goods from India now include Bill of Lading/Airway Bill; Commercial Invoice cum Packing List, and Shipping Bill or Bill of Export and mandatory documents required for import of goods into India include Bill of Lading/Airway Bill; Commercial Invoice cum Packing List, and Bill of Entry.
As such, after issue of DGFT’s Notification only three documents each would be mandatory for export and import as two documents (Packing List and Commercial Invoice) required by Customs have been merged into one document, whereas one document required by RBI (Foreign Exchange Control Forms – SDF for exports and A-1 for imports) and one document required by Ministry of Shipping (Terminal Handling Receipt) earlier, have now been dispensed with. ‘Cargo Release Order’ is not a mandatory document required by any regulatory agency, but is a commercial document issued by the Shipping line to the concerned importer. As regards, ‘Technical Standard Certificate’/ ‘Certified Engineer’s Report’, ‘Product manual’ and ‘Inspection report’, these documents are required in specific cases/products/tariff lines only and are not mandatory for all products.[5]
“These new measures will go a long way in reducing the transaction costs of exporters and importers. They would considerably reduce the turnaround time at the ports and for the banking channels as well,” EEPC India Chairman Anupam Shah said.[6]
It is widely expected that this step would help India to improve its ranking to a great extent. Not only this, it would also lead to corresponding reduction in transaction cost and time.
- Construction permits
On this count, India ranks 184th among 187 countries and the major problem lies with local authorities who issue permits. To curb this, common application forms have been launched in Delhi. MCD will get clearances from all departments, doing away with the running around involved and cumbersome procedures involved. Also, online color-coded maps for Delhi and Mumbai airports have been introduced to get no-objection certificate from Airports Authority of India. Similar steps are being taken for Archaelogical Survey of India and National Monuments Authority.[7]
- Enforcing Contracts
India has been ranked 186th among 189 countries due to poor enforcement of contracts, including those between phone users and telecom companies. Measures so far include the setting up of Special commercial courts in Delhi and Bombay High Courts to speed up cases related to enforcement of contracts.[8]
- Resolving insolvency
There are many pending litigations related to insolvency in National Company Law Tribunal due to the cumbersome process involved. Only measure taken in this regard by the government is the announcement of introduction of bankruptcy code in India by Finance Minister while giving the Union Budget.[9]
- Corporate Tax
Total tax rate estimated at 61.7% in India, compared to 41.3% for OECD countries, India has been placed 156th.[10] In this regard, Corporate tax will be reduced from 30% to 25% in a phased manner.[11]
Number of steps of procedure to apply for electricity connections has been reduced by Maharashtra and Delhi government.
Conclusion
Looking at numerous steps taken by government in making the process of starting up and doing business in India mentioned above, it seems that Prime Minister’s dream of bringing India at 50th position of ‘ease of doing business’ index can be realized very soon if the reforms keep taking place at this pace. There would definitely be criticisms, but, Rome was not built in a day. One must be optimistic about the scheme and enjoy the benefits that it evolves day by day. Such ease in doing business would undoubtedly boost ‘make in India’ campaign of NDA government.
[1] http://www.makeinindia.com/
[2] www.worldbank.org/
[3] http://pib.nic.in/archieve/others/2015/mar/d2015031208.pdf
[4] http://pib.nic.in/newsite/PrintRelease.aspx?relid=116935
[5] Ibid
[6] http://indiainbusiness.nic.in/newdesign/index.php?param=newsdetail/11455
[7] http://www.newslivetv.com/top-news/ease-of-doing-business-modi-govts-9-steps.html last accessed on 6th July, 2015
[8] Ibid
[9] http://www.firstpost.com/budget/union-budget-2015-live-jaitley-promises-indias-own-chapter-11-bankruptcy-law-2127063.html; http://finmin.nic.in/reports/Interim_Report_BLRC.pdf
[10] Supra 8
[11] http://articles.economictimes.indiatimes.com/2015-03-01/news/59642338_1_corporate-tax-rate-tax-regime-shefali-goradia
