The Manufacturing Sector: Growth Story of India

While India’s ease of doing business rank has improved significantly over the years, there are still certain parameters which remain weak when compared to other countries or in relation to other countries and there is constant endeavor by policymakers to work on these challenges. Some of the key parameters, where India scores low in comparison to other countries and where there are efforts made in recent times, is presented in the table. The initiatives taken by the government is commendable as these are made in the right direction and could fetch positive results in the near-to-medium term. POLICIES ARE IN-PLACE FOR EXISTING CHALLENGES 11 .

TIME TAKEN FOR EXPORTS AND DOCUMENTARY COMPLIANCE IN INDIA

45

41

41

38

38

40

National Trade Facilitation Program 2017

35

30

25

CHALLENGES

SOLUTIONS

20 Hours

14

NATIONAL LOGISTICS POLICY (NLP) - announced in September 2022 The logistics cost of India is currently high at 12-13 per cent of GDP as compared to global avg. of 8-10%. This policy aims to lay down framework and develop entire logistics ecosystem to reduce the cost of logistics to single digit in the next five years. 36 The SPICe+ (Simplified Proforma for Incorporating a Company Electronically Plus) form (INC-32) introduced in February 2020 aims to integrate multiple services, i.e., incorporation, DIN allotment, issue of PAN, TAN, EPFO, ESIC, and Opening of Bank Account, into a single web form. 37 ANational Trade FacilitationAction Plan (NTFAP) 2017-2020was announced in mid-2017, and it aims to significantly reduce the cargo release time across sea, air and land cargo stations. 38 (A chart below shows the results of improving compliance time since launch of NTFAP) NATIONAL SINGLE WINDOW SYSTEM: 2020-21 (announced in mid-2021) Aims to provide a single platform to enable identification and obtaining of approvals and clearances needed by investors, entrepreneurs, and businesses in India. Currently, this platform hosts several key approvals across 32 Central Ministries/Departments and 30 States/UTs. 39 In Mid-2021, The Department of Justice launched a ‘Enforcing Contracts Portal’ 40 with a view to create an efficient, effective, and transparent process. Also dedicated commercial courts were established in Delhi, Mumbai, Kolkata and Bengaluru for speedy resolution of commercial disputes with latest updates of the same available on the portal.

High logistics cost

15

12

10

5

0

2014

2015

2016

2017

2018

2019

Poor rank in ease of starting a business

Source: World Bank Database on Time for Exports and Documentary Compliance

(Note – Time is measured in clock hours. For e.g., if customs clearance takes 7.5 hours, the data are recorded as is. Additionally, data are presented for the survey year instead of publication year)

Time-consuming documentary compliances for global trade

Likewise, the time required for construction permits and other approvals has also reduced after the launch of Online Single Window System in 2017. The rank for Dealing with construction permits improved drastically in a single year from 181 in 2017 to 52 in 2018. 41 The incapacity to enforce contracts and resolve disputes is considered as the single biggest constraint to India’s Ease of Doing business. India established dedicated Commercial Courts to resolve commercial cases faster. However, India still takes around 1445 days to resolve a dispute which is comparatively very high. 42 To support the “Make in India” initiative, the companies starting between 1st October 2019 and 31st March 2023 could start a manufacturing company at a 15% corporate tax rate. 43 India also replaced multiple indirect taxes with a single indirect GST. After multiple tax reforms, the number of payments per year were reduced from 59 to 19 in the last decade. However, India still takes 250-254 hours per year for a business to pay taxes, which is still high as compared to other countries. 44

Duplication of information and compliance burden

41 Ease of Doing Business Report 2020 | 42 DPIIT – Ease of Doing Business Booklet 2021 | 43 PWC – Article on Corporate Tax rates | 44 India Budget – Report on Ease of Doing Business in India

Enforcement of Contracts

36 PIB – Press release on National Logistics Policy | 39 PIB – Press release on National Single Window System |

37 WIRC Reference Manual – 2022-23 |

38 National Trade Facilitation Action Plan for 2020-23 |

40 PIB – Press release on Enforcing Contracts Portal

36

Cushman & Wakefield

The Manufacturing Sector Growth Story of India

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