High compliance volume bottlenecks Indian firms: Stakeholders to Par panel

Stakeholders have informed a parliamentary committee that despite multi-phased central deregulation efforts, the absolute volume of business compliances remains a major friction point for domestic enterprises, according to the panel’s report.

According to the department-related parliamentary standing committee on commerce’s report on ‘Doing Business in India: The Way Forward’, stakeholders apprised the panel that while pan-India rationalisation drives have successfully neutralised over 40,000 regulatory obligations, the survival of overlapping rules continues to inflate fixed operational costs and suppress long-term capital deployment.

“The committee was informed by stakeholders that despite multi-phased central deregulation efforts, the absolute volume of business compliances remains an overbearing friction point for domestic enterprise interface,” it said.

Citing an example, it said a typical firm operating in India currently navigates an archaic and disconnected web of regulations consisting of 1,536 distinct Acts, which collectively impose 69,233 separate compliance requirements and mandate 6,618 independent statutory filings across the three tiers of Government.

The stakeholders have also informed that the Government has enacted the four Labour Codes, which combine 29 central laws and hold the potential to reduce compliance; however, once fully implemented, significant hurdles remain.

“As labour is a concurrent subject, each Central law is accompanied by a range of State-specific legislations, along with both Central and State regulations, adding layers of complexity to the legal landscape,” it added.

Stakeholders highlighted that due to this slow transition, corporate entities are still structurally bottlenecked by having to concurrently comply with 44 separate Central statutes and more than 100 distinct State-specific Labour laws, each maintaining its own independent reporting cycles, standard registers and manual compliance procedures, the report said.

It also said that fragmented regulations and multiple approvals at the Central and State levels cause “delays and increase the cost of doing business”.

The committee has noted that overlapping compliance requirements lead to duplication of effort.

“The Committee recommends rationalisation and consolidation of regulatory frameworks by adopting risk-based regulations and increasing the use of self-certification and third-party certification,” the report said, adding that during its interactions with various stakeholders, the committee observed that processes for obtaining approvals and issuance of NoCs continue to be time-consuming.

According to the parliamentary panel, despite significant policy and digital reforms, the transportation and logistics sector continues to face regulatory, procedural and infrastructure-related constraints that increase logistics costs and adversely affect the ease of doing business.

The committee has recommended that the Department for Promotion of Industry and Internal Trade (DPIIT) pursue simplification of tax and customs compliance by reducing duplicate documentation, streamlining audit mechanisms, ensuring time-bound disposal of approvals and refunds and promoting end-to-end digital processing.

On the issue of consumer protection, the panel said there should be strict enforcement of guidelines relating to dark patterns and misleading advertisements on digital platforms.

To protect users from predatory technology, it recommended the creation of a strict regulatory check on dynamic pricing, preventing platforms from using a consumer’s search history, device type or location data to artificially inflate prices during checkout.

Further, the panel has suggested that the department undertake periodic third-party evaluations of reform measures to promote ease of doing business and assess their on-ground impact on businesses.