वसुधैव कुटुम्बकम् - The world is one family
History and Introduction:
The doing business has its origins way back to 2002 where first paper published
in Quarterly Journal of Economics (Harvard University) by Simeon Djankov and
others on titled – The regulation of entry in which they did analysis of 85
countries on various parameters and concluding the impact of entry barrier to a
new business entity and its effect on economy.
They compared it with prudent
economic theories and come up with a conclusion that:
Countries with heavier regulation of entry have higher corruption and larger
unofficial economies, but no better quality of public or private goods.
Countries with more democratic and limited governments have lighter regulation
In order to understand the menace and articulation of doing business and to have
its understanding in Indian context, we need to brush up with few basic
coverings. There are economic theories which might modeled the intention of a
government to frame restrictions for a business entrant and these theories also
play the role of making perceptions of aftermath of these regulations on
The Invisible Hand theory:
In this theory, Market forces have upper hand in
determining the factors and government intervention is at the lowest level.
Every self-interest is in its invisible way helping the community at large.
The Helping Hand theory
In this theory, Government intervene into markets to
keep it stabilize. The Government brings regulations and restrictions. It argues
the intervention of government but assume government to be an autistic. It
advocates the intervention of government on facet of its social obligations
towards society. It assume the government to be completely bonafide and justify
government intervention into business as a beneficial policy for overall
community. Strict regulations means better quality goods for the society
because law ensures various checks and licenses
However, both of the theories ignore the role of politics and assume government
behavior as selflessly.
The Grabbing Hand theory
This theory suggests that either way of model of
government whether democratic or dictator is at end of day going to work for
their own benefits. regulation is pursued for the benefit of politicians and
bureaucrats (De Soto 1990). Politicians use regulation to favor friendly firms
and other political constituencies, and thereby obtain campaign contributions
and votes. In addition, an important reason why many of these permits and
regulations exist is probably to give officials the power to deny them and to
collect bribes in return for providing the permits.
So more the relaxation in laws and licensing policies by the government, it
refers to a situation where government is admitting the corruption practices
created by politicians by restricting the new business. This theory also suggest
that government do the regulations more strict either to advantage incumbents or
for their own. More government intervention is linked up with more corruption
The helping hand theory can said to be more found in socialist economies like
Russia where the Government is assumed to be completely bonaide and true to its
intentions. One who criticize the socialist countries do their rely on grabbing
Thus, the question of who regulates thus helps to discriminate among the
Relation of regulation and these theoriesThere are three measures of entry regulation:
- the number of procedures that firms must go through,
- the official time required to complete the process, and
- its official cost
It is important to note that in the 3rd aspect, the official cost is been chosen
instead of statutory fees for the reason being firstly the term cost is wider in
scope and will include notary expenses, fees, printing and secondly, a corrupt
regulator may also want to set fees low in order to raise her own bribe income
if, for example, fees are verifiable and cannot be expropriated by the
For 2nd aspect each procedure considered as a separate procedure no matter If it
related to single purpose. For example, applying for registration from trademark
registry is a separate procedure than applying for certificate of information
from Registrar of companies. It also noted that the procedure only consider
those aspects where a business has to met with an outsider. Hence, the number of
board meetings or general meetings required by law do not come within this span.
The helping hand model, in which governments regulate entry to cure market
failures, the capture model, in which governments regulate entry to protect the
incumbent firms, and the tollbooth model, in which governments regulate entry to
seek political benefits and bribes. We do not find convincing evidence to
support the capture theory, although our data are probably least suited to test
Our results are difficult to reconcile with the helping hand model, and even
with the elaborate versions of this model which recognize that the generally
benevolent regulation may have unintended consequences. On the other hand, all
the evidence is naturally consistent with the tollbooth version of the grabbing
hand model. Entry appears to be regulated more heavily by the less attractive
governments, and such regulation leads to unattractive outcomes. The principal
beneficiaries, if any, are the politicians and the bureaucrats themselves
From 2002 onwards, Doing Business highlights every year the successful reforms
carried out by each country. Since The Regulation of Entry was published, Simeon
Djankov and Andrei Shleifer have published eight other academic studies, one for
each set of indicators covered by the report.
The World Bank’s Doing Business 2020 study, released by the World Bank last
week, showed that India improved 14 places from 77 to 63 out of 190 countries in
the Ease of Doing Business (EODB) rankings.
Key reasons for the improvements cited by world bank in its report
Starting a business:
India made starting a business easier by abolishing filing fees for the
SPICe company incorporation form, electronic memorandum of association,
and articles of association. This reform applies to both Delhi and
Dealing with construction permits
India (Delhi) streamlined the process, reduced the time and cost of obtaining
construction permits, and improved building quality control by strengthening
professional certification requirements. India (Mumbai) streamlined the
process of obtaining a building permit and made it faster and less expensive
to get a construction permit.
Trading across borders:
India made trading across borders easier by enabling postclearance audits,
integrating trade stakeholders in a single electronic platform, upgrading
port infrastructures, and enhancing the electronic submission of documents.
This reform applies to both Delhi and Mumbai.
India made resolving insolvency easier by promoting reorganization proceedings
in practice. India also made resolving insolvency more difficult by
not allowing dissenting creditors to receive as much under reorganization
as they would receive in liquidation. This reform applies to both Delhi and
Road Ahead For 2021:
Consumer Protection law, 2019:Business and consumerism are two facet of one single coin. New consumer
protection law has come up with concept of product liability and has given more
shape to the efficacious remedy to enforce tortious wrong by make material
changes to the pecuniary jurisdictions of the forums, and by giving district
forums a power to review its own decisions and thus has given enforcement of
contracts an additional edge.
IBC bill, 2020:The bill seeks to remove bottlenecks and streamline the corporate insolvency
resolution process. It aims to provide protection to new owners of a loan
defaulter company against prosecution for misdeeds of previous owners. The
latest changes pertain to various sections of the IBC as well as introduction of
a new section.
Companies amendment bill, 2020In order to bring ease of doing business at its pace, companies act, 2013 has
been amended in 2015, 2017 and 2019. The Bill of 2020 has bring some significant
changes such as Central government empowered to exclude certain class of
companies whose debts are listed and not shares from definition of a listed
entity. The minimum time limit of 15 days for right issue excluded. All such
major changes are aim to bring ease to the startup & established entities and
thus ease is in its pace and line of International context.
Arbitration and Conciliation Amendment Act, 2019Enforcement of contracts is a key indicator to improve rating at ease of doing
business and accordingly, the government of India has put forward the material
changes to the same To avoid challenges to arbitral award on ground of
appointment of arbitrator, the changes made to the section 11 of law. The
qualification and experiences of arbitrator also expressly framed therein. In
order to avoid further litigations, confidentiality clause of arbitration
proceedings called tighten.
Competition amendment bill,2020The 2020 Bill is put for suggestions from public. The Bill for the first time
has introduced concept buyers cartel and accordingly changes has been made to
the anti-competition agreements. The rule of reason and rule of per se made it
more explicit in context of horizontal and vertical agreements. The changes are
also proposed to have a single wing of DG in line with CCI. In order to bring
corporate resolution at its most ease, material changes introduced in
combination provisions under the law.
Administrative & policy changes in nature of sub-delegationAdministrative law is a key menace of modern executive organ of state whereby
which it can cope up with routine practical difficulties of law. In line of
same, The Central Government through the concerned ministries has relaxed the
Foreign Direct Investment norms in different sectors vide series of Press Note
which was issued by Department for Promotion of Industry and Internal Trade.
Further, the Merger of banks will help in creating national presence and global
The Banking regulation billIn order to ensure governance and control over the Cooperative Banks and
concomitantly avoiding similar situation faced by Punjab and Maharashtra
Cooperative Bank Limited, the government has introduced the Banking Regulation
The Code on Social SecurityThe way GST has brought simplification in the Indirect tax system by introducing
one indirect tax for the entire nation which provided much needed impetus in
improving the Ease of Doing Business in India. Likewise, Government has
introduced Code on Social Security thereby subsuming 8 Central Labor Acts
dealing with Social Security.
The International Financial Services Centers Authority Act, 2019In order to provide world class environment to the participants in the Indian
market and for the establishment of a unified authority for regulating financial
services, the Government has passed the International Financial Services Centers
Authority Act, 2019.
The Finance Bill, 2020The Government has recommended various changes in the Finance Bill, 2020 not
only to ease business environment but also to iron out certain ambiguities
including but not limited to abolition of Dividend Distribution Tax, redefining
the concept of Residential Status.
Relaxation in FDI ProvisionsAfter the enactment of Foreign Exchange Management (Mode of Payment and
Reporting of Non-Debt Instruments) Regulations, 2019 the Government has relaxed
norms for Foreign Direct Investment in various sectors like Coal, Mining, etc.
The said changes are in line with providing ease of doing business providing
impetus to much-diversified economy.
Considering the intention of the government and its prominent approach in era of
darkness faulted by this pandemic creation, community is hoping for the greater
grade in area of ease of business at its most promising result.
- CS Shubham Budhiraja and
- CS Sameer Gahlot)