India has 26,134 clauses that can put entrepreneurs in jail for violating business laws, says report

For a long time, the Ministry of Micro, Small & Medium Enterprises has been focusing on making the process easier for entrepreneurs to set up their businesses. Despite its various efforts, starting a business for a Micro, Small & Medium Enterprise (MSME) in India doesn't seem that easy. Surprisingly, it's not the unavailability of cash that works as a deterrent, but the existence of as many as 26,134 imprisonment clauses enacted since independence for non-compliance of business laws in India, which make entrepreneurs think twice before floating a business.

It was revealed in a report titled 'Jailed For Doing Business' by TeamLease RegTech and Delhi-based independent think tank, Observer Research Foundation.

What is more surprising is that more than 26 thousand laws are not the only ones, as India has 69,233 unique compliances that regulate doing business in India, as per the report. 

Let us put these statistics in a simple way; out of five business-compliant laws, nearly two can send an entrepreneur to jail. 

The report says that compliance with laws puts a financial burden on MSMEs. It says that a typical MSME with more than 150 employees faces 500-900 compliances, which may cost Rs 12-18 lakh in a year. 

"This regulatory overreach impacts not just entrepreneurs running for-profits, but not-for-profit institutions as well. There is a widening gap between the goods and services the country needs and how the state views the entrepreneurs creating them," the report said. 

TeamLease RegTech said that its report is the first of its kind to date.

"The monograph is a first-of-its-kind consolidation of business compliance data that had, till date, only existed in silos across ministries and departments," the company said in a statement launching the report. 

RegTech's statement further reads, "Collated over the past seven years, the monograph has classified the data into seven broad domains — labour, finance and taxation, environment, health and safety, secretarial, commercial, industry-specific, and general."

Manish Sabharwal, Vice Chairman of TeamLease, said that excessive criminalisation of India’s employer compliance universe breeds corruption. "It blunts formal employment and poisons justice.

"This report is a wonderful contribution to ideas for actionable reforms; the government has made a good start in purging compliances, but truly reducing regulatory cholesterol requires extending that project to purging the 26,134 jail provisions for employers at the centre and state."