In 1867, reformer Bholanath Chandra wrote, “A widely diffused enterprising spirit is always the antecedent to that widely diffused national prosperity, through which alone can our nation ever hope to occupy a conspicuous position in the eyes of mankind. Such was the state of India once, and such ought to be the state of India again”.
We believe India’s enterprising spirit is held back by regulatory cholesterol and are confident that three reforms-decriminalisation, digitisation, and rationalisation—will increase our population of employers with the productivity to pay high wages and take India to its rightful place among prosperous and democratic nations.
History suggests that there are no poor people; just people in poor places; most of your wages are determined by where you live (country, state and city) and where you work (sector, company, and skill). India’s challenge is simple: our mass prosperity is held back by wages rather than jobs, high wages are held back by a shortage of non-farm employers with high productivity (our 63 million enterprises only translate to 28,000 companies with a paid-up capital of more than Rs 10 crore) and this employer population is held back by compliances/filings/jail provisions (over 85,000), irrational workflows (too many people, departments, and governments involved) and subjectivity in interpretation (show me the person, I’ll show you the rule).
This toxic brew breeds the corruption, uncertainty, and informality that make India poor. But this could change by digitising, rationalising, and decriminalising our regulatory cholesterol.
The digitisation reform vector needs a National Employer Compliance Grid (NECG) inspired by the architecture of our Digital Public infrastructure as applied to UPI (RBI’s initial target of a billion transactions a month has now been revised to a billion transactions a day). The NECG will facilitate seamless information exchange between employers and governments via an ecosystem of regulatory tech providers. This will include filing periodic returns to issuing licences, registrations, permissions, NOCs, and consent orders.
NECG requires two digital enablers: enterprise Aadhaar and enterprise DigiLocker. Entrepreneurs currently grapple with more than 23 distinct identities issued by various governments with their own lifecycles and periodic actions such as payments and renewals. The inability to extract compliance data across diverse and distributed data sources also hinders the government’s ability to sniff out defaults, delays and frauds for effective enforcement.
The proposed PAN 2.0 will serve as a unique enterprise identifier; it should instantly be adopted by the central government, with state governments getting a time-bound glide path. The enterprise Aadhaar (PAN 2.0) should be followed by enterprise DigiLocker-a secure digital repository for all government-issued licences, registrations, and permissions. A single source of truth, this tamper-proof, authenticated, and credible repository would reduce approval and compliance cycles from months to days.
The rationalisation reform vector is complicated since it now equates with civil service reform. Our 25 million civil servants have shifted from a steel frame to a steel cage because of thought worlds like prohibited till permitted, guilty till innocent, drunk driving is an argument against cars and the tendency to be too small for big things and too big for small things. In 1748, the political philosopher Montesquieu posited that laws must exhibit consistency and called their underlying relationships the ‘Spirit of Laws’. The prevailing spirit underlying our economic laws is characterised by distrust. The rationalisation vector is most impactful at the state government level and offers Chief Ministers a non-fiscal tool to make their karmabhoomi a more fertile habitat for high wages.
The decriminalising reform vector must accept that the meagre outcomes of Jan Vishwas 1.0 (only 50 central government employer jail provisions removed) arose from asking bureaucrats to cut the tree they are sitting on. Jan Vishwas 2.0 must remove all jail provisions that don’t fit five clear criteria: physical harm to other individuals, intentional defrauding of stakeholders, externalities to societies so large that the violator cannot compensate, no jail provisions in general clauses that define the crime too broadly or do not specify the crime, and no jail provisions related to delayed and inaccurate filings, procedural infractions, incorrect calculations, and wrong formats. These five criteria eliminate almost half of the more than 5,000 central government jail provisions and create a template for the over 20,000 state government jail provisions.
India’s employed poverty challenges arise from a sense of humour about the rule of law that gives us too many people on farms, too many people in self-employment, too few people in manufacturing, and too few high productivity employers. Nobel Prize economist Daniel Kahneman suggested we instinctively step on the accelerator to go faster, but often better results come from taking our foot off the brake. He was talking about many things but one of them was India’s regulatory cholesterol.
The author is Manish Sabharwal and Jayashri Patil, The Writers are with Teamlease Services. Views are personal