New-age firms find biz climate warmer

Labour-intensive companies feel constrained: Sources

While labour-intensive sectors continues to be bogged down by labour-related rules, newer firms, including start-ups, have reported a more favourable environment, according to an official survey. This also means that jobs per unit of capital could become a casualty.
 
The Enterprise Survey, covering 3,500 manufacturing firms across India in 2016, found newer firms take less time in obtaining approvals than older firms. Newer firms include start-ups established after 2014.
 
On the basis of the survey, conducted by the NITI Aayog along with the Mumbai-based IDFC Institute, the report on ease of doing business would be launched on Monday.

 

The survey found that labour norms were a bigger constraint for labour-intensive firms.
 
“We find that labour-intensive sectors, which create proportionately more jobs per unit of capital investment, feel more constrained by labour-related regulation," a NITI Aayog statement said.
 
To buttress the point, it said compared to other enterprises, 19 per cent more enterprises in labour-intensive sectors were likely to report that finding skilled workers is a major or very severe obstacle, while 33 per cent are more likely to report that hiring contract labour is a major or very severe obstacle.
 
They also feared losing a greater number of days due to strikes and lockouts, and reported higher average time for environmental approvals and longer power shortages.

 
Last week, the government had questioned India Inc. as to why it wasn’t investing in labour-intensive industries even in states which have gone for labour reforms. The survey showed that problems still exist in labour-intensive industries, amid the debate on job-less growth. 
 
However, there are variation among states. The survey revealed that enterprises in high-growth states are significantly less likely to report major or very severe obstacles in land, construction-related approvals, environmental approvals, and water and sanitation availability, relative to those in low-growth states.
 
Firms located in high-growth states also reported 25 per cent less power shortages in a typical month, compared with firms in low-growth states, the survey showed.

 
The experience of firms with fewer employees is different from that of larger firms. In some cases, large firms face more regulatory barriers than smaller firms, the survey found.
 
Firms with more than 100 employees took significantly longer to get necessary approvals than smaller firms with less than 10 employees.
 
Large firms were also more likely to report that regulatory obstacles were a major impediment to doing business and that they incurred higher costs for getting approvals.

Survey findings

• Newer firms take less time in obtaining approvals compared to older firms
• Labour norms are a bigger constraint for labour-intensive firms
• Compared to other enterprises, 19% more enterprises in labour-intensive sectors are likely to report that finding skilled workers is a major obstacle
• Compared to others 33% are more likely to report that hiring contract labour is a major or very severe obstacle