The report, 'Ease of Doing Business: An Enterprise Survey of Indian States', made a strong case for labour reforms, easier entry and exit of firms and level playing field for small and larger enterprises.
Prepared jointly by the Niti Aayog and IDFC Institute, the report was released today by Union Minister for Law Ravi Shankar Prasad and Ministry of Commerce and Industry Nirmala Sitharaman.
Referring to the labour reforms, it said reforming labour laws and achieving greater flexibility in their implementation can greatly help enhance the ease of doing business.
"According to our survey's finding, firms in labour- related regulations particularly are onerous. This fact translates into enterprises avoiding labour-intensive sectors," the report noted.
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It suggested that growth and ease of doing business form a virtuous cycle such that one reinforces the other.
The survey, the report stated, shows about half of the enterprises do not borrow from financial institutions and about a third consider lack of access to finance as a major source of obstacles for business in the country.
"This suggests that enhancing the access to low-cost capital to business could be an important vehicle to improve business environment, especially in poorer states such as Bihar," it said.
On facilitating firms' entry and exit, the report said other things being equal, an increased pace of "creative destruction" that allows more rapid entry and exit should lead to an increase in productivity.
The report stressed on the need of providing level playing field for small and large firms.
"The regulations that place disproportionately large compliance burden on large firms need to be addressed. The survey has shown that in several instances, larger firms perceive greater regulatory obstacles compared to smaller firms... This state of affairs discourages smaller firms from growing larger," it noted.
Speaking on the occasion, Sitharaman said this report is going to be "the most important" contribution that Panagariya is making and "I am sure it is going to reveal lots of things".
She also said "we are going through transformational era" and the ease of doing business is getting full attention of the government so that India becomes a manufacturing hub.
Prasad noted that India has transformed a lot in the last three years.
"In the last three years, 95 mobile manufacturing units have come up in India. 45 are mobile manufacturing plants and 49 plants are making mobile components... Noida and Greater Noida are emerging as big hub for mobile manufacturing," he said.
"India can become country for innovation... The digital infrastructure happening in hinterland is remarkable," Prasad added.
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