Easing Business Friction

Doing business in India has always been perceived to be challenging.That’s changing, but slower than it can. Let’s go beyond perceptions and see what’s working, what’s not, and what could be on this unfinished agenda.

Account Aggregator System

The Government of India (GOI) just launched an Account Aggregator (AA) system. The intention is to seamlessly share financial data between players in the financial services sector like banks, insurance, pensions and securities. This regulated flow of information will happen with the consent of the owner of the financial data. Eight banks, representing 40% of bank accounts in the country including State Bank of India, ICICI Bank and HDFC Bank, have signed up. When information flows from entities that have information to those who lend, the friction in the financial system will ease and smaller entities needing liquidity will be the biggest beneficiaries.

The India Stack

This journey started in 2009 when GOI figured that it needed a tech stack to effectively render services to its 1.4 billion citizens. A stack includes architecture, computer languages, user interfaces, apps, developer tools like APIs and the requisite infrastructure.

Two institutions took shape at the time. The Unique Identification Authority of India (UIDAI) for creating Aadhar, a biometric identity database. And the National Payments Corporation of India (NPCI) for digitizing retail payments and settlements. Combined, the two enabled authentic, direct transfer of benefits into citizen accounts and allowed citizens to make payments using their Aadhar identifier.

The AA system (referred to earlier) now enables lending as well, leveraging the India stack. This open banking system will now create a marketplace, and integrating it with global payment networks will facilitate the globalization of Indian businesses on an unprecedented scale.


If there’s a universal dream in India across every stratum of society, it’s to possess a better home. Till 2016, stories of corruption, collusion, unfinished projects, poor quality and litigation were commonplace. The Real Estate Regulation and Development Act (RERA) got parliamentary approval in March 2016. Standardization of contracts to make them more consumer centric and bring more discipline to the business has helped protect the interests of vulnerable buyers. While alignment with State Governments is still a work in progress, the judiciary has weighed in favor of buyers in a few landmark cases, penalizing builders for breach of contracts under RERA. That has given buyers more confidence that they will get fair treatment when dealing with builders and the powerful lobbies that support them.

Insolvency and Bankruptcy Code

The Insolvency & Bankruptcy Board of India (IBBI) Regulations also came out in 2016. There is a clear code of conduct for the creditors’ committee that steers the resolution process, stipulating timelines that must be adhered to. After initial successes involving large accounts and large sums, the system has been beset with low resolution rates, long delays and huge haircuts in the values realized. New issues encountered pertaining to cross-border and group insolvency, services companies and leased assets will need definitive resolution. Resolution Professionals and Asset Reconstruction Companies need to be far more effective. Clearly, the system isn’t working well enough yet.

National Monetization Pipeline

Accelerating business warrants that our infrastructure be upgraded significantly. The Government of India recently announced a National Monetization Pipeline (NMP) of 6 lakh crores. This involves brownfield projects, where the revenue rights, not ownership, would be transferred to qualifying private sector entities for further development. Roads, railways and power assets would comprise the majority of NMP assets. The rest would include telecom, mining, transportation, natural gas, petroleum, warehouses and stadia. The expectation is that these assets will perform better, realize better yields and appreciate in value when they’re privately run. Funds generated from NMP would be used for new infrastructure projects. It’s an idea whose time has come, despite naysayers who argue that national assets are being pawned cheaply. That said, as the recently launched initiative involving privatization of trains or the slow pace of the Air India sale has shown, capturing private sector investments will be a challenge, emanating from a fear that rules could suddenly change. Fresh thinking will help.


In a digital world, India can ill afford an ailing telecom sector. Especially in a world hit by Covid, where practically every sector is dependent on robust connectivity. Vodafone Idea is crippled with a monstrous debt of 1.8 lakh crores, including bank debt, deferred spectrum dues and adjusted gross revenues (AGR). More than 80% of that is owed to GOI. Airtel is hurting as well but is in better shape. GOI has finally woken up. The ill-conceived AGR now prospectively excludes non-telecom revenues. There’s a 4-year moratorium on AGR and spectrum payments. Interest and penalties, constituting 70% of AGR dues, have been rationalized. Spectrum usage charges have been annulled for auctioned spectrum. 100% FDI is permitted, and GOI can now convert deferred dues to equity. This will resurrect a sector teetering on the brink and help lenders breathe again. Importantly, it will speed up the ushering in of 5G and its vast, tangible socioeconomic benefits.

Ease of Doing Business

The World Bank just killed the publication of their ‘Doing Business’ report because of the irregularities in its compilation. Irrespective, governments must focus on removing impediments to accelerating business. The examples above seem to indicate that this is central to GOI’s agenda.

The revoking of retrospective taxes, the formation of the National Asset Reconstruction Co Ltd (NARCL) and the India Debt Resolution Co Ltd (IDRCL) to tackle non-performing assets (NPAs), and GST refinements are working. Various PLI schemes - for automobiles and auto components, chemicals, food processing, renewable energy and white goods etc. – are working too. Export performance is also up 45% over the last 3 months, and could well be 1.5 times of pre-pandemic levels. All of this signals the right intent.

But there’s so much more to do

Here are some top of mind issues. Provisions relating to depreciation on goodwill and taxes on slump sales have been amended retrospectively in the 2021 budget. Several companies who had paid advance taxes in 2020 have now been asked to pay taxes and interest.

There’s the matter of bidding for government business. The overemphasis on the lowest cost has diminished the focus on quality. A recent article in ET suggested a quality-cum-cost-based selection, assigning clear weightages to multiple technical parameters, while factoring in cost.

And then there’s the major issue of delayed payments, where every effort is made to delay even legitimate payments for goods supplied or services rendered. Just the paperwork involved is mind boggling. When cash flows are stalled, works slows down or stops, hurting the company in question and many others in the ecosystem, including smaller ones who can ill afford such hiccups. We see this as much in the private sector too.

Government and industry are like motorcycle riders in a dome. Mutual trust, non-adversarial goals and steady acceleration will prevent precipitous decline.

Views expressed are personal.

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