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Bhubaneswar: Advocating better business environment for startups, Reserve Bank Governor Raghuram Rajan Saturday said India has done away with licence raj, but ‘‘Inspector raj’’ continues to some extent.
Rajan also said regulations should be meant for betterment of industry and not to discourage entrepreneurs and suggested a system of self-certification with some checks on the part of the authorities to prevent misuse.
Delivering the fourth lecture of Orissa Knowledge Hub (OKH) series on ‘‘India: Prospects and Challenges’’ here Saturday, Rajan said, “In order to create more jobs, we have to focus on development of the industries. There is a need to provide them better environment and an easier set of regulations for these industries. Though India has done away with the Licence raj, Inspector raj still continues.”
Citing an example of regulations, he said, “We have seen that regulations are liberal in the United Kingdom, but it is very heavy in Italy. The startups in the UK grow faster than their Italian counterparts.”
The Central bank’s focus is to create a harmonious condition for strong, sustainable growth and more jobs, he said.
‘‘Jobs are created by SMEs (small and medium enterprises) that grow into large enterprises. In order to create these kinds of startups, four to five conditions are needed— easy to enter and exit, access to input and output markets, protection of property rights, making the whole process of enterprises politically viable and creating a safety net for the employees of startups,” Rajan said.
Stressing on the need for ease of entry and exit, Rajan welcomed the proposed Bankruptcy Code, stating it will allow firms to exit and new firms to come up.
One of the biggest roadblocks faced by the SMEs is getting land at affordable price, he pointed out. ‘‘Land acquisition cost in India is one of the highest in the world. Governments need to find ways out for the SMEs on land either through land banks or industrial parks where land can be made easily available,” he suggested.
‘‘To overcome this, we at RBI, have brought the medium enterprises in the ambit of priority sector lending. This is because our medium enterprises are tiny compared to those in the developed countries,” he said, adding, “Since small banks tend to be comfortable with lending to the small entrepreneurs, we need to strengthen the regional rural banks and urban cooperative banks.”
With regard to the present economic condition in the country, he said Indian economy is in the midst of recovery but some areas are still under stress. ‘‘Broadly, the economy is in the midst of a recovery… but it is an uneven sort of recovery. Some sectors are certainly experiencing stress.’’
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