How easily can you start a business in India? How much time, cost and effort does it take for an entrepreneur to glide through official requirements, red tape and licenses governing starting of a business? These questions are key determinants of how encouraging a country is to its entrepreneurs and startups who are major income and employment generators.
The economic survey that recently dwelled on these issues found that a series of licenses and approvals from multiple counters are still required for businesses to be able to start operating in India. It found that entrepreneurs in Delhi have to procure 26 licenses and approvals to open a restaurant. In addition, they also need a ‘Police Eating House License’ from the Delhi police that asks for 45 documents. Similarly, in Bengaluru 36 licenses and approvals are required while in Mumbai the number is 22. Compare this to China where only four licences are required for opening an eatery.
As the Covid-19-hit Indian economy restarts itself, it is extremely important to promote the opening of new businesses that will generate much-needed income and employment for the people. This calls for a renewed focus on improving the Ease of Starting Business for newbie entrepreneurs in the country. Much has been said about the ‘ease of doing business’ and how India has improved its global ranking in this index in recent years. However, we often fail to underline the importance of ‘ease of starting a business’. When it comes to this index, India still stands at a dismal 136 rank globally.
An Entrepreneurial Revolution Needed To Revive Economy
The International Monetary Fund predicts the Indian economy to contract by 4.5% in FY21 in the coronavirus aftermath. An astonishing 12 core people have already lost their jobs including 2.7 crore youth between the ages of 20 and 30. From layoffs to salary cuts (ranging from 5% to 60% and more) to stalling of increments and appraisals, it’s a bleak picture all-around. In a survey, one-third of Indians have reported a fall in their personal incomes with 48% of active job seekers and 43% full-time professionals are expecting fewer job openings in the coming months.
For an economy where 1.3 Mn Indians join workforce every month, creating new jobs now requires a major entrepreneurial push, particularly in smaller towns. It is new businesses that will generate employment and income.
The Road Ahead: What The Government Can Do?
- The Government must ensure that for those simple and uninitiated rural and small city people wanting to start a business, the entry barriers must be kept extremely low. The registration and licensing of their ventures must be made extraordinarily easy through a single-window system at affordable/negligible fees. Quite often these processes require heavy documentation with many of these papers being in English, an immediate deflator for many in small towns. Apart from making papers available in local languages, there is also a need to reduce the number of these documents along with the time and cost involved in the whole process.
- The process for acquiring permits for construction of plants and warehouses should be streamlined limiting the need for interactions with agencies for preapprovals and inspections. Quicker timelines and quality control along with safety mechanisms is the need of the hour.
- Acquiring electricity for commercial purposes is another costly, time-taking and procedure-ridden task. It takes months to get power flowing to the plant and the site of operation. This has to be brought down. Then the reliability of supply and transparency in tariff calculations are also critical. The government must invest in training electricity utility personnel in this respect while closely monitoring their performance.
- The government should ensure that there is no gap between loans sanction and loan disbursal. Typically, it takes months and even years between the time when a loan is sanctioned and actually released for the intended business.
- The authorities should also handhold them with respect in their business operations, sales & marketing and strategy. The government can appoint designated nodal officers in small towns who can advise these newbie entrepreneurs.
- The government should reduce the gap between university systems and businesses which employ the pass outs. There should be complete alignment between our education system and our corporate world. In fact, industry leaders should be encouraged for the skill-building and re-skilling of these entrepreneurs. In this digital age, data analytics and digital marketing must be made an essential component of any business education curriculum.
- Instead of aiming for very high and fanciful income-generating business models, the government should foster a wave of micro-entrepreneurship models, with an earning ranging from INR 15K to 25K to 50K on a regular/monthly basis.
- Providing business skills to wantrepreneurs in smaller towns and villages is another critical need of the hour. At Bada Business, we are in talks with one of the state governments to launch a business skill training program for youth in rural areas. However, the concept is in elementary stages right now. We need countrywide programs to train youth in business and entrepreneurial skills.
These are some immediate measures that the Government can undertake to give an impetus to Ease of Starting Business in the country. More importantly, these entrepreneurial initiatives must not remain initiatives, but go on to become ‘finitiatives’, i.e., they must become sustained long-term businesses.