Expert Speak India Matters
Published on Aug 10, 2023 Updated 14 Days ago
The Jan Vishwas Bill is a transformative vision sitting atop the tip of a tyrannous compliances iceberg
Jan Vishwas Bill provides a framework for future reforms An iceberg has 90 percent of its body underwater and 10 percent above the waters. The Jan Vishwas (Amendment of Provisions) Bill, 2023 that was passed by Parliament last week doesn’t make it even as the tip of the iceberg. On its own, the number of provisions the Bill addresses is statistically insignificant before the task at hand. And yet, this is one of the most far-reaching policy actions, one of the biggest reforms, and a possible game-changer for a rising India in recent times. There are four important learnings from the passage of the Jan Vishwas (Amendment of Provisions) Bill, 2023 by Parliament. First, individual leadership is proving to be the core differentiator and driver of reforms. Second, despite a strong political mandate, incrementalism remains the currency for critical reforms. Third, institutional force powers knowledge with actions on reforms. And fourth, well-researched ideas are becoming the new platforms for delivering reforms. Together, they provide a framework for compliance reforms, which need to travel a long way before they impact the ease of doing business in India at scale. The Bill currently awaits the procedural Presidential ascent before it becomes law.
The Bill is an equally important realignment of the legal infrastructure of the country with the needs of a modern economy that, by all indications, is likely to be the world’s third largest within this decade.
This Bill is a tentative but important step towards removing imprisonment clauses or turning them into monetary fines and penalties. It is tentative because the Bill barely scratches the surface. Given that there are 26,134 imprisonment clauses that impact businesses at an aggregate, the Bill decriminalises less than half-a-percent of them. And yet, the Bill is important because decriminalising frivolous compliances is an important policy action of reducing, if not ending, the dreaded Inspector Raj that has been running an extortion racket over small enterprises for the past 75 years. Further, the Bill is an equally important realignment of the legal infrastructure of the country with the needs of a modern economy that, by all indications, is likely to be the world’s third largest within this decade. In a nutshell, the bill decriminalises 183 compliances. Of these, 113 pertain to employer compliance while doing business. That’s 0.4 percent of the total 26,134 imprisonment clauses businesses face. In other words, 26,021 clauses remain to be rationalised. We use the word ‘rationalised’ and not ‘removed’ because not all the clauses need to be decriminalised. Entrepreneurs need to be held accountable for wilful negligence and misconduct. If there is wilful tax evasion, wilful environmental degradation, potential harm to life or limb of workers, or compromises in food or pharmaceutical products, for instance, these need imprisonment clauses. Thus, under the 100-year-old Boilers Act, 1923, the two-year imprisonment for six provisions under Section 24 has been removed, and the penalty for illegal use of boilers is now INR 1 lakh. Or, under the relatively recent law, the Food Safety and Standards Act, 2006, two provisions—providing false information (Section 61) that carries a jail term of three months, and carrying out a business without licence (Section 63) that carries a jail term of six months have been decriminalised. Likewise, Section 25 (use of non-standard weights and measures) under the Legal Metrology Act, 2009; and Section 41 (non-compliance with intimation requirements) under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 have been decriminalised.
Entrepreneurs need to be held accountable for wilful negligence and misconduct.
More important than decriminalising clauses that affect doing business is the impact of the Jan Vishwas (Amendment of Provisions) Bill, 2023 on omitting Section 66A of the Information Technology Act, 2000. In its 24 March 2015 order, the Supreme Court had declared this provision unconstitutional. However, the police continued to use this section to arrest citizens. Now, with the passage of the Jan Vishwas Bill, arrests under this section will finally end.

Four lessons from the Jan Vishwas Bill

There are four lessons the Bill offers.

Lesson 1: Individual leadership matters

The first lesson is the reforms conviction of leadership. In less than seven days from the launch of Jailed for Doing Business, a report that highlighted the excessive imprisonment clauses in India’s business laws, Prime Minister Narendra Modi personally took charge and led these compliance reforms. He was shocked by the findings and initiated immediate reforms. He not merely pushed for reforms but expanded their scope to include not just doing business but ease of life as well (Section 66A of the Information Technology Act, 2000, for instance). In less than a month, a series of meetings with various Secretaries led to the formation of a “Committee on ‘Decriminalising Non-compliances for Advancing Ease of Doing Business in India’” at NITI Aayog, under its then CEO Amitabh Kant. Kant brought together all the relevant ministries under a single umbrella and gave policy shape to the political will. Although he left midway to take on the role of Sherpa of the G20, the work continued and in less than 10 months the Bill was first tabled in Parliament on 23 December 2022.

Lesson 2: Institutional structures enable

The second lesson is the coming together of relevant institutions. Following the Committee recommendations and the subsequent tabling, the Bill was then referred to a Joint Committee of both Houses of Parliament. Over nine sittings, a clause-by-clause examination of 19 ministries and departments by the 31-member committee, chaired by P.P. Chaudhary, resulted in 105 recommendations—seven general, of which six have been accepted; and the balance 98 being specific provisions. Provisions for fines have been substituted with monetary penalties; provisions where both imprisonment and fines were prescribed have been, in most cases, substituted with monetary penalties; and provisions where significant public interest were at stake have been made harsher. The Bill was tabled again in the last Monsoon Session and subsequently passed by the Lok Sabha and Rajya Sabha, bringing together all voices of democratic institutions on a single page.

Lesson 3: Incrementalism is yesterday’s conversation

The third lesson is a policy incrementalism. Despite the political will powered by political presence in Parliament combined with a strong operational push, the Bill has taken the incremental route rather than a bold big-bang reform—113 clauses have been decriminalised out of 26,134 total (0.4 percent) and 5,239 clauses have been decriminalised at the Union level (2.2 percent). Further, if we take out the 534 imprisonment clauses in Union labour laws, which will change once the Labour Codes are notified, it leaves us with 4,705 imprisonment clauses awaiting rationalisation by Parliament; the 113 clauses comprise just 2.4 percent of the total. This is an opportunity lost, both on the ground in terms of impact, and in the narratives space for a government that’s as entrepreneur friendly as can be. Perhaps, the run-up to Elections 2024 has seen the infiltration of caution into the political decision-making and joined hands with a legislative risk that doesn’t befit either the politics of the day or the actions of an otherwise strongly reformist government.

Lesson 4: A good idea will create its own space

The final lesson is the vocal intent as well as the proven ability of the government to listen to voices from academia and civil society. For 75 years, we have heard the expression “Inspector Raj”. The Observer Research Foundation report, Jailed for Doing Business, defines the problem sharply and offers specific policy solutions. This indeed is the way forward, as the movement from an idea to a law, which is a framework for future reforms, has shown. In other words, if citizen voices need to be heard, they need to stop grumbling and start researching. A well thought through idea will make policy space for itself.
The final lesson is the vocal intent as well as the proven ability of the government to listen to voices from academia and civil society. 
Even as we celebrate this small but potentially transformative victory, here are some numbers that display the energy India’s economic policymakers are spending to keep entrepreneurs dancing to their tune. In the past year, there have been 6,870 changes in compliances; 1,964 in the past quarter; 652 in the past month; and 225 in the past week. On 7 August 2023, when this analysis was written, there were 18 changes in compliances, from the ministries of power, labour and employment, chemicals and fertilisers, and law and justice; regulators such as RBI, SEBI and CBIC; and states including Maharashtra, Madhya Pradesh, and Karnataka. This needs to stop. Policy uncertainty doesn’t help anyone. Our job creators and job seekers deserve better. Of the 63 million enterprises in India, only 1 million (1.5 percent) have registered for social security; only 0.5 million (0.8 percent) pay social security actively; only 70,000 or 0.1 percent have revenues of more than INR 5 crore; and only 22,500 (0.04 percent) have a paid-up share capital of more than INR 10 crore. Imagine what India would look like if these numbers merely doubled. For a US$10 trillion GDP aspiration, our lawmakers need to up their game. The Jan Vishwas Bill is a great start, has a robust framework, and is supported by a strong political will. But the journey to melt and mould the compliances iceberg is long, steep, and arduous.
Gautam Chikermane is Vice President at the Observer Research Foundation.  Rishi Agrawal is co-founder and CEO at Avantis RegTech.
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Author

Gautam Chikermane

Gautam Chikermane

Gautam Chikermane is Vice President at Observer Research Foundation, New Delhi. His areas of research are grand strategy, economics, and foreign policy. He speaks to ...

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Contributor

Rishi Agrawal

Rishi Agrawal

Rishi Agrawal is co-founder and CEO at Avantis RegTech.

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