While the Indian government takes steps to improve the ease of doing business in the country and boasts of achieving a better global ranking on the criterion, a new study has highlighted 26,134 imprisonment clauses in India’s business laws that entrepreneurs and corporations face.
Five states have more than 1,000 imprisonment clauses in their business laws: Gujarat (1,469), Punjab (1,273), Maharashtra (1,210), Karnataka (1,175), and Tamil Nadu (1,043), according to the study by Observer Research Foundation and Teamlease RegTech.
Of the 1,536 laws that govern doing business in India, more than half carry imprisonment clauses. Of the 69,233 compliances that businesses have to follow, 37.8 per cent (or almost two out of every five) carry imprisonment clauses.
“This regulatory cholesterol has ensured that while India’s impressive aggregate gross domestic product (GDP), at $2.6 trillion, makes it the world’s fifth-largest economy, its GDP per capita, at $1,900, stands below Bangladesh, Syria, and Nigeria,” says the report.
“Excessive regulation has made compliance a full-time department of firms, and placed an unnecessary burden on micro, small and medium enterprises (MSMEs). A typical MSME with more than 150 employees faces 500 to 900 compliances that cost Rs 12 lakh to Rs 18 lakh a year,” it adds.
More than half the clauses requiring imprisonment carry a sentence of at least one year. Several of these clauses criminalise process violations, while some of them punish inadvertent or minor lapses rather than wilful actions to cause harm, defraud, or evade. For some laws, delayed or incorrect filing of a compliance report is an offence whose punishment stands on par with sedition under the Indian Penal Code, 1860. The largest number of imprisonment clauses are found in labour laws, with more than 50 such clauses per law.
India’s entrepreneurial landscape is full of laws,rules, and regulations that have raised barriers to doing business, claims the report. The Factories Act, 1948, for instance, read with 58 rules, contain 8,682 imprisonment clauses.
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