Context:

• State governments impose a significant compliance burden on employers, accounting for 80% of criminal provisions, 65% of filings, and 63% of total compliances.
• Chief Ministers (CMs) can improve the business environment through three key reforms: Decriminalisation, Digitisation, and Rationalisation.
• These reforms can help boost high-wage employment and foster economic growth.

Decriminalisation of Employer Compliance:

• The current scenario:
  • India has 26,134 employer-related jail provisions, of which 80% can be removed by state governments.
  • The Jan Vishwas Bill eliminated only 110 out of 5,239 central employer jail provisions due to bureaucratic inertia and vested interests.
• Recommended approach:
  • CMs should adopt a “reversing the gaze” approach, removing criminal provisions except in cases involving:
    • Physical harm to individuals.
    • Intentional fraud against stakeholders.
    • Major societal externalities affecting public order, national integrity, or property rights.
    • Vague general clauses that do not specify crimes clearly.
    • Procedural infractions like delays or inaccuracies in filings, incorrect formats, and calculation errors.
  • The upcoming Jan Vishwas 2.0 could eliminate another 40% of employer-related criminal provisions.
  • States like Madhya Pradesh and Tamil Nadu have made small reforms, while Gujarat, Karnataka, and Odisha are considering changes.

Digitisation for Simplified Compliance:

• The need for digital transformation:
  • 65% of India’s 69,233 employer compliances can be made paperless, presence-less, and cashless.
  • India’s Digital Public Infrastructure (DPI) has already transformed areas like vaccine certification, toll payments, de-duplicated welfare records, and payments.
  • For example,
    • RBI’s initial UPI target of a billion monthly transactions has now been revised to a billion daily transactions.
    • Recent announcements on PAN 2.0 and the Entity Locker (a single source of truth, tamper-proof, and authenticated document repository for all government-issued licenses, registrations, and permissions).
• Proposed solutions:
  • State Employer Compliance Grids (SECGs) should be implemented, replicating DPI’s open-architecture technology for:
    • Filing periodic returns.
    • Issuing licences, registrations, and NOCs.
    • Ensuring a single-source, tamper-proof repository for compliance documents.
  • SECGs can be operational in 180 days and should integrate with national initiatives.
  • Gujarat, Maharashtra, and Andhra Pradesh are in the early stages of adopting SECGs.

Rationalisation of Governance and Compliance Frameworks:

• Challenges in bureaucratic structures:
  • India’s state civil service has become rigid and inefficient, often prioritizing prohibition over permission and guilt over innocence.
  • Excessive bureaucracy: Number of government departments in some states:
    • UP (72), Uttarakhand (63), Assam (54), Punjab (51), MP (47), Maharashtra (35), Andhra Pradesh (31), Gujarat (27).
  • Comparatively, developed nations operate with fewer ministries: Japan (15), UK (22), US (25).
• Way forward:
  • Simplifying governance structures: By consolidating departments can enhance efficiency.
  • Decentralisation of policy-making: PM Modi’s idea that 29 CMs matter more than one PM aligns with philosopher Karl Polanyi’s view that markets are shaped by social, political, and economic factors.

Conclusion:

• India’s economic challenge lies in “employed poverty”, with too many people in low-productivity jobs.
• CMs can accelerate reforms by removing unnecessary compliance hurdles, enabling businesses to flourish and generate higher wages.
• As Daniel Kahneman (Nobel Prize-winning economist) suggests, sometimes the best way to accelerate progress is not by stepping on the accelerator but by removing the brakes - a principle CMs should embrace for economic transformation.