Mr. Dhanendra Kumar Former Chairman CCI, & Principal Advisor Indian Institute of Corporate Affairs Ministry of Corporate Affairs, Govt. of India at RPR 2012, 23-26 August, Goa, India

1. The Regulators & Policymakers Retreat 2012 ■ 25th August 2012 ■ Goa
Dhanendra Kumar
Former Chairman CCI, & Principal Advisor
Indian Institute of Corporate Affairs
Ministry of Corporate Affairs, Govt. of India
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2.  India- Still Attractive Investment Destination?
 Investments in and from India
 How India ranks on doing business?
 Ease of starting a business in India-Concerns?
 Efficiency and corruption issues?
 Principal Challenges in Doing Business in India-
◦ Policy, Regulatory and Procedural
◦ Law/ policy induced competition distortions
◦ Governance
 Way Forward-
◦ National Competition Policy
◦ Improving governance, reducing cost to do business
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3. Source: www.therichest.org
Globally, India viewed as an important market-4th.
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4.  As per the Wealth Report 2012*-
◦ by 2050 the world‟s economic centre of gravity, a
theoretical measure of the focal point of global
economic activity based on GDP, will have shifted
eastwards to lie somewhere between China and
India
◦ China will overtake the US to become the world‟s
largest economy by 2020, which in turn will be
overtaken by India in 2050
Source: *The Wealth Report, 2012 was published jointly by the Citibank and Knight Frank 4

5. ◦ Fourth largest economy after USA, China and Japan, and growing.
◦ Among the major emerging markets, India ranks second in terms of
economic growth with the IMF forecasting a GDP growth rate of 6.9
percent for 2012.
◦ Large market - Second most populous country in the world, thirty percent
of 1.2 billion inhabitants reside in urban areas-also huge rural market .
◦ Diverse manufacturing sectors (steel production, oil and gas refining,
auto, plastics, textiles) including traditional sectors agriculture,
handicrafts, etc.
◦ Services, especially telecom, information technology, business processing/
outsourcing etc. – prominent contributors.
◦ Skilled manpower at all levels.
◦ Demographic dividend – youth population availability as productive
workers, also market will further grow with them.
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6.  Investment into India growing, but now
moderated: In 2007 - 25 bn USD, grew to 40 bn
USD in 2008.
 As of 2010-11, inward investments - estimated
at 24 bn USD.
 India has emerged as a major source of
outbound investments: in 2000-2001 – 677 mn
USD whereas in 2010-11 – 168.43 bn USD
Reportedly, India Inc is sitting on a cash pile of Rs 9 lakh crore. Also, dip
in inward investments is a cause of concern to Indian economy.
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9. India‟s rank is 166th (2011-12) in terms of „starting up new
businesses„. This needs urgent attention- linked with job creation
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10.  This means lesser new enterprises and which
(importantly means) less employment.
 A study by several experts reveals – The
younger companies are, the more jobs they
create, regardless of their size..
 Critical need - India‟s impending need to
create jobs-need of easing
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11.  India ranks 56th in this year‟s World Competitiveness
Report .
 Among the BRICS, India continues to rank with South
Africa (50th) and Brazil (53rd) and ahead of Russia (66th).
 The gap with China is, however,widening:
◦ the score difference between the two economies has increased
sixfold between 2006 and today.
 Supply of connectivity, transport, ICT, and energy
infrastructure - causes of concerns.
 Similar picture in the health and basic education.
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12.  In the past five years, discontent growing in business community about
lack of reforms and apparent inability of government to provide a more
conducive environment for business.
 Corruption (99th) and burdensome regulation (96th) fuel this discontent.
 Since 2006, India‟s score in the institutions pillar has plunged from 4.5
to 3.8. Once ranked a satisfactory 37th in this dimension, India now
ranks 69th, having dropped 11 places this year alone.
 India does possess a number of remarkable strengths in the more
advanced and complex drivers of competitiveness. This “reversed”
pattern of development is characteristic of India-
◦ boasts a vast domestic market
◦ well-developed and sophisticated financial market (21st)
◦ reasonably sophisticated (43rd) and innovative (38th) businesses.
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13.  Governance issues
◦ Lack of transparency, accountability
◦ Time required for regulatory clearances, complexity
◦ Corruption
 Regulatory uncertainty – lack of clarity in
policy direction – leading to lack of
investment.
◦ Reportedly, India Inc sitting on a cash pile of Rs 9
lakh crores
◦ Similarly, foreign investors hesitating to invest in
India – need clarity, predictability and assurance.
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14.  Creating a Single National Market – fragmented
due to variations in state level business
regulations.
◦ Various research studies have revealed that State
Governments (particularly neighbouring) have vastly
differing legislations on commercial taxes, labour, land
acquisition, incentive for priority sector, and most
importantly for intrastate movement of goods and
services.
 Cost of doing business – regulatory burden –
time and cost of complying with procedures
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15.  A classic example - price of automobile.
 Currently applicable duty on automobiles,
which includes customs duty, CENVAT, excise
duty, central sales tax, motor vehicles tax,
passenger and goods tax, state sales tax, and
additional road user/toll taxes, can mean that
one may buy a car manufactured in Gurgaon
at a much cheaper price 2,000 km away in
Goa or Pondicherry.
Need for harmonizing business regulation to enable a single national market.
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16.  Section 104 of Indian Motor Vehicles Act- allows for
temporary permit to private parties in respect of notified
areas can be provided only if a State Transport
Undertaking has not applied to ply their vehicles on the
route.
 Impact on competition due to rules can be observed in
allocation of airport slots, which are critical for an airline
to achieve financial viability.
 Discriminatory application of taxes across states has also
been found to cause market distortions and has been
identified as a major barrier in development of a single
national market. Government is already making efforts to
address this issues through its uniform code.
 Contd……
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17.  The distortion in agricultural produced markets
caused by the Agricultural Produce Marketing
Committee (APMC) Act - causing huge
inefficiency and high marketing costs, besides
possibility of possible cartel-like behaviour by
licensed traders.
 Lack of consistency with respect to competition
principles amongst sector regulators vis-a-vis
Competition Commission of India - affecting the
state of competition.
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18.  Improving governance
◦ Ensuring timely clearances, introduce accountability
◦ Bringing policy clarity across sectors
◦ Policy certainty and predictability
◦ Review impact of regulation- time, cost, rigor- with objectives
◦ Addressing policy/ law induced restrictions
◦ Setting up a facilitation cell in each Ministry/ Department
◦ Use of information technology across sectors to cut: corruption
and infuse time efficiency – this will boost investor confidence
 Raising education attainment and skill levels
◦ Skill up-gradation – major challenge – need big
push from Government – participation of industry.
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19.  Improving infrastructure – particularly roads,
transportation, power and basic services
 Leveraging agriculture sector productivity
 Implementing National Competition Policy.
 Achieving regulatory and policy coherence –
proposed in 12th Plan – to avoid self-inflicted
wounds.
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20.  Competition Policy – an overarching policy
framework - to infuse competition principles
across Government measures, statutes etc.
 More positive and proactive
 Relatable more to Govt. Departments/ PSUs,
encourages them to adopt competition principles,
correct policies with anti-competitive outcomes.
 Committee on National Competition Policy
 More proactive stance by government agencies,
regulatory bodies, state-substate agencies
 Greater role, and competition in reforms, in States
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21. ◦ Promote competition - can optimize efficiency – review government
policies to check anti-competitive outcomes
◦ Promote economic democracy, restrict rent seeking practices, efficiency in
public procurements
◦ Strive for development of markets, and a single national market as
fragmented markets impede competition
◦ Ensure wider choices and better quality of goods and services
◦ Synergized relationship among sectoral regulators and/or CCI and
prevent jurisdictional grid-locks
◦ Build strong competition culture amongst stakeholders - public officials,
business, trade associations, consumers associations.
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22. Dhanendra Kumar
Email: dkumar1946@gmail.com
M: 09810600018
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