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Explained: The ‘Ease Of Doing Business’ In India

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Business in India is a ‘barter deal’. You pay-you stay. Right from setting up, to the day to day activities business as usual in India means:

 1. A Friendly Hand-Shake

When you’ve got millions riding on a project every second wasted is a rupee lost and greasing your palm is the only way to get things done. From registration of the company to obtaining licenses, many difficulties and delays are faced along the way. According to this Reuters article, more than 40 permits are required to set up a basic supermarket. And ‘speed money’ i.e. bribes through middlemen or local partners are needed to hasten the process. This sort of bribery in business has become so casual that it’s almost a routine now The middleman (usually members of EPILPA- Industrial law practitioners’ association) collect the ‘speed money’ from retailers and pass it on to government officials. Since they don’t take a cut from these transactions they can’t be held responsible for the bribes. But they provide speed and access to government officers who sign off on permits once paid. And the entire transactions are negotiated through this middleman so the company isn’t directly involved. While from the government’s end, no high-level official dealing with licenses accepts a bribe directly. It’s a very sneaky under the table process. Subordinates collect the money from trusted people which is shared by juniors and seniors and goes up the bureaucratic chain. This type of bribe for licenses has become a sort of mandate leaving those that don’t conform to them stuck for months or sometimes even years without their permits.

Quoting a businessman, Punit Agarwal, CEO of Promart- “In India, you don’t need to ask retailers if you need to pay bribes. It’s known. Here you have a price tag for everything.”

 2. A Personal Relationship With Prospective Employees

While bribery at a setup stage is quite prevalent bribery at the hiring stage is understated. Especially for getting a government job, bribes and political connections are pretty common. Some even pay as much as an average of 17 months’ salary to get in! And this trend of bribing for hiring happens in private sectors as well mostly in the IT sector. Where either a college ends up paying a recruiter for keeping up its campus’s placement reputation or the graduate hungry for a job gives the bribe. The bribe could go up to Rs. 2 lakh for a job with a Rs. 3-4 lakh CTC. And most people from the HR department pocket it. As much as bribes are important connections are equally valued when it comes to jobs. For a job with 2000-3000 candidates companies only take those candidates referred by its own staff for interviews while the rest are sent home. And graduates themselves use creative ways to get around this sort of corruption by simply copy-pasting the referral email from their friends to get an interview.

3. Taking Shortcuts Wherever Possible

According to an EY survey on corruption in businesses, 20 out of 50 Indian corporates said there is widespread bribery and corruption in business. One in six said bribery is commonly used to win contracts. If not money then gifts and entertainment are also exchanged at times for business to survive. In a place where managers are expected to deliver excellent results, forgery, fraud and account manipulation is very common. Very often you’ll find managers making payments to gain regulatory approval of a product, reduce their taxes, or avoid customs duties. Sometimes companies form shell companies, carry out Benami transactions use dead souls as directors, create offshore accounts to either conceal some political involvement, evade tax, or manipulate stock prices. Shortcuts are taken very often to get things done but this has now become a usual practice.

4. Raising Funds At Any Cost

From paying bribes to showing falsified profits businesses often procure loans from banks and are unable to repay them. Case in point being the Nirav Modi scandal where bribes were given to bank officials to borrow loans from abroad. When the time came to repay the loans Nirav Modi fled from the country. Another example is Vijay Mallya who despite showing poor books of accounts was constantly guaranteed loans by different banks and ultimately he declared himself bankrupt. This corruption has led to a large number of NPA’s in the country and the common man bears the brunt in the form of higher taxes or higher interest rates. Even money raised through the stock markets has its fair share of scams and scandals. Thousands of shell companies are set up to raise money through the markets and once the money is raised the companies vanish or shut down. This was a dominating phenomenon in the 90’s when at least 122 companies came up with IPO’s to raise money and then vanished after collecting the money.

The list of corrupt business practices can go on and on because it’s become a casualty rather than a novelty. There are very few stages in the business process where corrupt practices aren’t prevalent. This makes us wonder has corruption become business as usual in India?

Also, read how India’s new insolvency and bankruptcy code has your back

Explained: The ‘Ease Of Doing Business’ In India was last modified: by
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