Monday, February 29, 2016

India's Business set-up Bottlenecks

Building a factory in India is not for the faint hearted. 

Even if a company is fortunate and manages to buy land - which, by the way, is becoming more and more difficult, expensive and time-consuming due to complex laws, people's rising expectations and local politics - that is just a start. 

A manufacturing company in India, on average, has to comply with nearly 70 laws and regulations. Apart from the multiple inspections, it has to file around 100 returns in a year, according to a 2013 report by consultancy firm Deloitte. 

Then there is the double maze of tax and labour laws that can be a big pain even in the best of times. Poor infrastructure does not help either. 

Will the NDA government, whose economic programme hinges on boosting the manufacturing sector, be able to bring about the required change? 

Will it be able to debottleneck the process of setting up and running a factory in the country so that its plan to create millions of new jobs in manufacturing sees the light of day? 

Problems in acquisition of land, delays in environmental and other clearances and infrastructure bottlenecks have taken a toll. 

In the past five years (2011 to 2015), new projects have seen a marked reduction of 44 per cent from the period between 2006 and 2010. The value of stalled projects more than tripled during the period. 

Worse, straddled with huge distressed assets, core sector companies are more concerned about avoiding default rather than making fresh investments. 

As a result, India's investment-to-gross domestic product ratio has fallen for five straight financial years now. 

The NDA government has tried to correct this through a massive increase in investments to build infrastructure. It is likely to follow this policy in the coming Budget, too.

Source - 

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