With the startup ecosystem evolving rapidly in India, it is probably the best time for small and medium enterprises (SMEs) to enter the market. But, unfavourable taxation regime, high cost of starting a business and archaic laws, rules and regulations make the country indeed a hard place to set up and run a business.
In fact, World Bank, in its latest report, has ranked India 134th amongst 189 nations in ease of doing business. Against the key parameter of starting a business, India is worst off among the BRIC economies. It is in 179th position, while Russia is at 88th, Brazil at 123rd and China at 158th.
According to a survey done by Firstbiz and Greyhound Knowledge Group, Indian SMEs find starting and running a business difficult because of the prohibitive business climate. In fact, among the organisation surveyed, 96 percent expects regulatory reforms for ease of doing business in this year’s budget.
For this year’s budget, what SMEs really want is a flexible regulatory policy.
So, what can the new government do to facilitate ease doing business in India?
Here’s a look at what are the challenges SMEs face in ease of doing business:
*Government support scheme in Tier 3 cities: 88 percent organisations from Tier 3 cities such as Nasik and Indore feel that there is a need for special start schemes for SMEs in these cities. They feel that the government must help start SMEs in Tier 3 cities that in Tier 1 cities which already has organisation headquarters. 78% organisations felt the need of special start-up incentives and support.
*Setting up exclusive regulatory agency for SMEs: The survey found an interesting trend– almost in all cities there was a unified need for setting up an exclusive regulatory agency for SMEs. The report shows that most respondents felt that a common body is required at the centre exclusively for SMEs to handle their regulatory affairs.
*Creation of government body that will lay out regulations: The report shows organisations want creation of a single governing body that will lay out starting as well as operation regulations. The World Bank had noted that in terms of the number of procedures and time required to start a business, India is below average among South Asian economies (eight countries). A single governing body will make it easier for organisations to start and continue business as they can avoid multiple regulating bodies.
*Increasing transparency: The survey report shows that 93 percent organisation in Delhi felt that a single regulating body would lead to standardisation in bookkeeping and reporting, which will increase transparency. In smaller cities such as Indore, Nasik and Kanpur, almost 85 percent organisations felt a presence of a common regulatory body would lead to standardisation of registration procedures.
The survey was conducted across 540 small and medium businesses across India. The survey covered 9 Indian cities. Among the Tier 1 cities covered were Delhi, Mumbai and Chennai; Tier 2 Cities covered were Chandigarh, Ahmadabad and Coimbatore; and Tier 3 cities covered were Nasik, Indore, and Kanpur.
What SMEs expect from the new government in this budget:
All organizations interviewed for the survey are expecting the government to take notice of the recent wave of entrepreneurs in the country and establish a new program that allows these start-ups to access funds locally rather than looking at US-based funds. In fact, all the organisations want a direct channel between the Narendra Modi government and entrepreneurs to ease the process and avoid too many hurdles.
All the organisation surveyed also want schemes and incentives for SME startups.
In addition, 91 percent organizations stated the need for creation of a common regulatory body for SMEs that helps govern the issues and mandates specific to their needs.
Will Prime Minister Modi listen?
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