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Job Creation & Labour Regulation


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Entrepreneurship can be encouraged by reducing the infructous Regulatory and other Governmental requirements and controls over new start-ups for at least 5 years or till they reach a total revenue of Rs. 10 crores or profit levels of Rs. One crore, whichever is earlier, by which time they should be stable enough to carry the burden of more rigorous implementation of Rules & Regulations. Till then let their customers be their regulators by choosing to patronize them or not. After all, small enterprises have direct relations with their customer and it is only as they grow larger or begin to export, that such direct contact becomes lesser and hence more regulation/ certification would become necessary to enable distant customers to trust the Quality. To avoid multiple counting, in trading and repairing enterprises, the value of purchases of goods and spares for resale must be deducted from the calculation of revenues, even as the taxes as applicable on the sales commission or service charges are collected.

Markets in goods and services for immediate consumption such as for – haircuts, beauty treatments, pav-bajjis, samosas and tea – work so well that it is hard to develop them so that they fail to deliver efficiency and innovation; while markets in assets are so automatically prone to booms and busts that it is hard to design them so they work at all. Speculation, herd exuberance, irrational optimism, rent seeking and the temptation of fraud, drive asset markets to overshoot and plunge – which is why they need careful regulation. Markets in goods and services need less regulation than markets in assets. Of course for goods, especially unpackaged, where  the customer deals directly with the supplier need even less outside regulation, as here the customer himself acts as the regulator by directly exercising his choice to purchase or not. For other goods and services where the the customer is one or more steps away from the producer and has no choice but to trust or rely on, in the stated quality of the product or in the adequacy of the qualifications of the service provider, proper Government regulation and certification is essential.

The scope for reduction in official regulatory procedures can be estimated from:

1). The average time taken to setup a new business in India is 29 days as compared to 2 days in Singapore or Hong Kong.

2). The time taken to close a firm, on insolvency is more than 4.3 years in India as against  to 9 months in Singapore or Hong Kong.

3).  The number of Departments and Authorities (earlier about 42,since reduced to about 17) that have the power to permit, inspect, hassle and shut down, even micro, mini and small enterprises is indicative of the difficulty of starting and growing an enterprise or business in India. There should only be a single registration requirement, say GST and a single window for all other clearances. Safety  and Quality control can be ensured by random checks by the concerned Authorities with an attitude of education for compliance and not harassment.

4). This attitude of suspicion and lack of trust in our citizens has led to many Laws that are cumbersome and even difficult to really comply with and seem to be made with the intention to be able to find fault with and so extract money from the entrepreneur or businessman.

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