Key highlights:
- Jailed for Doing Business is a first-of-its-kind monograph by the Observer Research Foundation and TeamLease RegTech pointing out the faults in our business laws.
- Compliances and imprisonment clauses in India’s business laws make running a business challenging.
- Many states’ business laws can put entrepreneurs in a myriad of legal binds if not adhered to.
- Leaders shed light on how the current business ecosystem is a deterrent to ease of doing business in India.
- The monograph talks about key strategies for ease of doing business in India
Running a business is no simple feat. This is especially true for businesses operating in India. Why? Because of the strict compliances and regulations present in the Indian business laws, which can even put business owners behind bars.
A recent monograph by TeamLease RegTech and the Observer Research Foundation, named Jailed for Doing Business: The 26,134 Imprisonment Clauses in India’s Business Laws, reveals some staggering facts regarding the business laws in India, which have been enacted since independence but have never been reformed. The monograph sheds light on how imprisonment clauses in the business laws are holding back thousands of businesses and what union and state governments can do for ease of doing business.
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Compiling all business compliance data for ease of doing business
Jailed For Doing Business: The 26,134 Imprisonment Clauses in India’s Business Laws is the first-ever compilation of data on the compliances and imprisonment clauses present in the Indian business laws the general population isn’t aware of.
Gathered and assembled over the past seven years by a regulatory technology solutions firm—TeamLease RegTech— the monograph has categorised the data into different broad domains, namely, labour; environment, health and safety secretarial; finance and taxation; general; commercial; and industry-specific.
The monograph reveals that there are 1,536 laws governing doing business in India. Of these, 678 have been implemented at the Union level. Within these laws lie 69,233 unique compliances for ease of doing business in India. Among these, 26,134 clauses can put business owners, big or small, in jail if not adhered to. To put it simply, nearly two out of five compliances put business owners and aspiring entrepreneurs at risk of imprisonment as a penalty.
All these clauses and compliances have been passed by the union and state governments since independence. And you may be surprised to know that five states include more than 1,000 imprisonment clauses in their business laws. These states are Gujarat (1,469), Punjab (1,273), Maharashtra (1,210), Karnataka (1,175), and Tamil Nadu (1,043).
Running a business in india
While these clauses and compliances were initially enacted for ease of doing business, they seem counterproductive in today’s era. The monograph reveals that, on average, Indian MSMEs (Micro, Small and Medium Enterprises) with more than 150 employees face 500-600 compliance issues every year, costing them 12-18 lakhs in a year. It turns out that these legislations, rules, and regulations are getting in the way of running a business in India, plaguing the entire business ecosystem.
This excessive regulatory reach not only impacts businesses operating for profits but also non-profit organisations. The hostile clauses present in these laws have built walls to the smooth operation of a business and obstructed the creation of jobs, wealth and GDP generated by businesses.
What leaders say about
ease of doing business
The Vice-Chairman of TeamLease, Manish Sabharwal, said, “The excessive criminalization of India’s employer compliance universe breeds corruption, blunts formal employment and poisons justice.” He added, “This report is a wonderful contribution to ideas for actionable reforms; the government has made a good start in purging compliances but truly reducing regulatory cholesterol requires extending that project to purging the 26,134 jail provisions for employers at the centre and state.”
Department for Promotion of Industry and Internal Trade secretary Anurag Jain said, “Recently, there was an article about ‘jailed for doing business ….27,000 laws where a person can be jailed for doing business. We had a close look at it. We are very open that if somebody brings it to our notice, we need to engage and see how to improve our systems. The government is separately working on the ease of doing business 2.0 framework as well to facilitate entrepreneurship.”
Samir Saran, President of the Observer Research Foundation, expressed, “This publication lays the foundations for engaging with and delivering India’s third-generation economic reforms. The recommendations in Jailed for Doing Business, and its thorough analysis, must compel us to change how we assess our businesses and treat those who run them.” He further said, “I see this report as a springboard for new research and efforts that are needed to do away with rules, laws and codes that hold back India’s entrepreneurial energy and its emergence as a global economic powerhouse.”
Recommendations
The report offers some recommendations on the mitigation of excessiveness of business laws, rules and regulations in India.
It recommends using criminal penalties with restraint and forming a regulatory impact assessment committee as a means to lay the foundation of policy reformation. It also suggests rationalising the current imprisonment clauses. For example, removing criminal penalties from procedural lapses and unintentional omissions while keeping imprisonment for wilful transgressions, such as evasion of taxes and actions leading to loss of life or destruction of the environment.
Besides, establishing standards for legal drafting, implementing sunset clauses, and bringing all reforms into single overarching legislation can be key to offering dignity to business owners and aspiring entrepreneurs.
Bottom line
As the monograph—Jailed For Doing Business: The 26,134 Imprisonment Clauses in India’s Business Laws— reveals these surprising facts regarding how businesses operate in India, there seems to be a wave of policy reform coming in the near future, helping in ease of doing business for entrepreneurs and business owners.
References:
- Jailed For Doing Business | Observer Research Foundation (ORF) |10 Feb 2022
- ‘Jail for doing biz’ report: DPIIT Secy says bulk of trouble due to labour laws, states need to act | PTI | Mar 9 2022
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