It can take up to an average of 240 days to register a business in some states in India – or almost 10 times longer than the average calculated by the World Bank’s Doing Business report, a new survey by India’s strategic planning unit NITI Aayog has found.
The findings, released on Monday (28 August), suggest that while Prime Minister Narendra Modi claims to be making progress on cutting red tape for business, much of this has still be realised by Indian entrepreneurs.
The survey, which was carried out last year and is titled “Ease of Doing Business: An Enterprise Survey of Indian States” covers 3,276 manufacturing enterprises spread across India, including 141 early-stage firms.
In comparison the World Bank’s ‘Ease of Doing Business’ survey, which ranked India at 130 in 2017 and surveys experts (rather than firms) in just two cities of Delhi and Mumbai.
The NITI Aayog survey found the average time taken to set up business in India in 2016 was 118 days, with a wide variation across states, ranging from as low as 20 days to up to even 240 days.
“According to our survey, time taken to set up business is much longer on an average than that according to the World Bank’s ease of doing business survey,” NITI Aayog vice-chairman Arvind Panagariya (pictured above) is cited by Economic Times as saying.
The survey firms cited labour constraints, difficulties in scaling up and the shortage of information needed to grow.
Easier for new firms
The surtvey further found that on average, only about 20% of start-ups reported using single window facilities introduced by state governments for setting up a business.
Single window systems have been introduced in many states in recent years. This system was part of the checklist of 98 reforms agreed upon by state governments under the “Make in India” initiative in 2014.
In fact for all the changes that the government proclaims to be making only 38% of the enterprises surveyed said that the regulatory environment for setting up a business had improved. Another 38% said it had stayed the same while 21% said it had worsened.
However the survey found that Indian enterprises found obtaining construction permits, was better than the survey results of the World Bank’s ease of doing business report.
High growth states foster start-ups
With the news emerging this week that India's economy slowed to 5.7% in the second quarter of this year, India must do more to cut red tape.
The survey found that in the 15 fastest growing states the share of young enterprises is higher than in the 14 low-growth states (26% in the former versus 22% in the latter).
The survey’s authors say the higher number of young firms in high-growth states could be due to regulations and processes being relatively easier in recent years for starting a business in these states.
For example in high growth states it takes 18 fewer days on average to get construction permit compared to low-growth states and 10 fewer days on average for getting labour approvals .
In the words of the great poet Henry David Thoreau, “Our life is frittered away by detail. Simplify, simplify, simplify!" This should be India's new clarion call.
Timm is a South African who writes on small business in emerging economies. Follow Small Business Insight on Twitter at @Smallbinsight and on Facebook.
Stephen Timm is a