4 Lakh illegal rickshaws, 6 Lakh illegal vendors and Why Politics Matters – even to Entrepreneurs
In an earlier post on entrepreneurship, I mentioned how “the “burden†of government can be very heavy – which is why it takes 11 steps on an average, to start a business in India. Not just that, these 11 steps take about 89 days on an average! In that same post, I also wrote: “I have nothing against the government trying to help entrepreneurs. It should; it mustâ€. What exactly did I mean by that?
Did I mean that the government should give handouts to entrepreneurs – or somehow select potential “winners†– and help them? Far from it. Actually, the government cannot select “winners†among entrepreneurs. It simply does not have the skills or the capability. As a friend & fellow activist, Sanjeev said bluntly, “Do we expect generalist IAS officers who have never been able to set up a paan shop successfully in their lives to advise entrepreneurs on how to succeed in business?â€
So how exactly can a government help? The short answer is by staying out. The long answer is a bit more nuanced.
But before that, some numbers and facts…
Did you know that more than 80 percent of the cycle-rickshaws in Delhi are illegal (since there are only 99,000 of them allowed legally)? Govt functionaries in Delhi extort a crore a month from the cycle-rickshaw pullers alone! This was the figure in 2006. It has probably doubled since then.
Were you aware that Delhi’s approximately 600,000 street vendors operate without the necessary license and pay up about Rs 12 million per month in bribes? Again, this is from 2006
Were you aware that a law in the state of Maharashtra requires farmers to sell their sugar cane to a specified sugar mill in the district[i]?
Did you know of the law in Kerala which mandates that once a farm is registered as producing one crop, it cannot change its crop without government permission[ii]?!
To understand the implications, imagine if you were allowed to do only a certain kind of job and needed government permission to change employers or your type of work! Or imagine if you were forced to work only in MP if you had an MBA from MP.
Imagine if the Mumbai Municipal Corporation were to decide that Mumbai can only have 5000 CAs – or 10,000 Doctors. Get it?
Would it now surprise you to know that “India ranks among the world’s worst countries at encouraging entrepreneurs. For ease of starting a business, India is 166th out of 183 countriesâ€
Or that it takes 7 years (yes, seven) to close a business in India and 1,420 days to enforce a contract!
You would think this is a bad joke – except it is not.
And millions of small entrepreneurs suffer from this stranglehold of regulations and permits; the vestiges of a still omnipresent (and deeply embedded) license-permit Raj.
Which brings us back to our question: What can the government do?
Staying out of most things would be a start, But that is not enough.
It needs to do more. More than just “staying outâ€.  It can for example, help create an enabling environment – an environment that makes it easy to start a company; that makes the process not just simple but also transparent – and quick.
The one think all entrepreneurs are perennially short of, is time. And trust me, a government department is the last place they want to be while dealing with the challenges of starting a business.
It can also help by making it easier to start a company – and close one down. It can help by keeping things simple. And making regulations easier to understand and transparent.
It can help by overhauling the judicial system – such that it does not take “1,420 days to enforce a contractâ€.
It can do more – by simplifying procurement procedures; by ensuring easier lines of credit (rather than the usurious 5-6% a month that many small businesses pay).
Above all, it can “free up†education and open up the sector to private enterprise, especially vocational education and skills-based training. So that India’s 500million youngsters grow up with skills and knowledge better prepared for a world that they are going to face tomorrow. Otherwise we are certain to end up in a situation in which it may be better to get a robot that to hire Indian labour. That would not be nice. It would actually be disastrous. Disastrous for an entire generation of youngsters; disastrous for society.
Why does all this matter? Why do entrepreneurs matter?
It matters because there is only one certain way for us to get ourselves out of the sheer, grinding poverty and lack of opportunities that plague much of India. Entrepreneurs create jobs. Jobs lead to growth. Growth leads to prosperity.
It is that simple.
I wish the government understood that. Jai Hind, Jai Bharat!
Also see: Liberalisation से किस गरीब का फायदा हà¥à¤† है? and इससे मà¥à¤¹à¤¾à¤°à¥‹ कà¥à¤¯à¤¾ लेनो देनो?Â
From The battle continues, dt November 4, 2012.
..Earlier, he said, almost Rs.300 per day was needed to pay as bribe to keep his rickshaw running. “There was constant fear of being nabbed at any crossing as all the areas were ‘no entry’ zones. But now no one harasses us. Only at night, sometimes, one is asked to shell out some money.â€
His tale is shared by Parshuram, who regularly takes furniture from Kirti Nagar to East Delhi and Ghaziabad. “I used to pay about Rs.300 on a daily basis. But that harassment has now stopped,†he quickly summed up as he hailed down a truck to ferry his empty rickshaw back to Kirti Nagar from Ghazipur flyover. “I will now pay just Rs.50 for the ride back and hope to get another consignment during the day.â€
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“Earlier lakhs of rickshaws were confiscated every year and released after extorting bribes. But the municipal corporation employees and the police no longer have the power to arbitrarily confiscate and destroy them. This has meant saving at least Rs.200 crore a year for rickshaw owners,†said Madhu Purnima Kishwar of Manushi, who has been battling for the cause of rickshaw-pullers and owners for the past 17 years.
On what prompted her to take up the cause, she insisted that “the most prominent influence on my life was that of Gandhiji and he stood for swaraj or self-governance with minimal State control. I always believed that liberalisation was far more urgent for the poor and advocated the need to dismantle the licensing regime.â€
Ms. Kishwar said she was of the view that “the law of market†and “demand and supply†should decide the number of rickshaws or even vendors needed on the roads. “Their number remains directly proportional to the number of customers. If it exceeds, the revenue drops and the pullers tend to shift to other areas.â€
…
Ms. Kishwar also alleged that in Lawrence Road and Punjabi Bagh private yards have come up where the vehicles are surreptitiously parked after they are illegally impounded. She added that other forms of corruption like collecting money from them at designated water trolleys, issuance of illegal licences to them and getting indirect favours like mobiles recharged were also being adopted by the corrupt personnel for fleecing the poor pullers.
Ms. Kishwar is a breath of fresh air. She is the proverbial “Kamal” (lotus) in “keechad” – “keechad” that is socialist thinking of intellectuals in India.
From India home to second highest number of shadow businesses: Study, 27 May, 2014:
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Researchers at Imperial College Business School in London found that a large number of shadow entrepreneurs are operating in India without registering their businesses with official authorities and eventually hampering economic growth.
The team created a league table based on a study of 68 countries and found Indonesia with the highest ratio of 130 shadow economy businesses to every business that is legally registered, followed closely by India at 127.
Shadow entrepreneurs are defined as individuals who manage a business that sells legitimate goods and services but they do not register their businesses.
This means that they do not pay tax, operating in a shadow economy where business activities are performed outside the reach of government authorities.
..
“We found that government policies could play a big role in helping shadow economy entrepreneurs transition to the formal economy. This is important because shadow economy entrepreneurs are less likely to innovate, accumulate capital and invest in the economy, which hampers economic growth,” he added.
In the study, Professior Autio and Dr Kun Fu estimate that business activities conducted by informal entrepreneurs can make up more than 80 per cent of the total economic activity in developing countries and the types of businesses include unlicensed taxicab services, roadside food stalls and small landscaping operations.
The researchers suggest that if India improved the quality of its democratic institutions to match that of Malaysia, it could boost its rate of formal economy entrepreneurs by up to 50 per cent, while cutting the rate of entrepreneurs working in the shadow economy by up to a third.
This would mean that the government could benefit from additional revenue from taxes.
..
From Himachal Pradesh farmers now need a licence to sell milk, fruits, SHIMLA, August 3, 2014:
Thousands of small and marginal farmers here who are selling milk, fruits and vegetables, door to door everyday in the towns from their nearby fields in villages will now have to procure a “food licence†from the authorities in Himachal. A big section of farmers in the villages encircling the urban towns in Himachal are not growing the staple rabi and kharif crops because of small land holdings and have shifted to growing off-season vegetables for the domestic markets and their own use. They are also having a few milch cattle reared for milk and cow dung and majority of them are selling the spare milk and other dairy products in the nearby municipal localities.
The government has fixed August 4 as the last date for farmers to acquire this food licence. If any farmer is found selling his products without the licence he could be jailed for six months and fined Rs 5 lakh.
The registration has been made mandatory for all farmers under the Food Safety and Standards Act 2006. The farmers will have to submit their yearly return record, medical certificate and their photographs with the authorities. ..