Ease of Doing Business in India is a hot topic currently, and all business folks are talking about it. That includes me, a “medium size” entrepreneurs. I was cribbing that all the govt moves seem targeted at making life easier for large to giant enterprises, and the everyday problems that grind the small and medium ones are not even on the radar screen.
I would give examples like having to pay “consultancy fee” (extortion money) to excise & sales tax babus even if you are 100% clean, in order to avoid harassment & delays. The fact that it takes 4-10 days and one or more personal appearances to get cargo cleared from customs, compared to 30 seconds on-line in most business friendly countries. The fact that it takes a cargo truck 20 days to reach from Chennai to Delhi due to repeated checks by tax babus, while the transit time for the container from US to India is 19 days. That all this sharply increases working capital requirements (in a capital scarce country like India), and is a huge interest cost.
I was sharply rebutted by a JNU Professor who opened my eyes. He remarked that “Ease of doing Business” was there and I was talking like a poor, exploited victim, a bottom-of-the-pile entrepreneur. He gave me examples of the huge difficulties that the micro-entrepreneurs face, and who remain voiceless, and off the radar screen.
The vegetables seller who vends his produce on pavement markets or handcarts. He borrows money from the local moneylender every morning, goes to the mandi (wholesale market) to buy produce, stands in the sun, rain, dust & humidity all day, has to rent a lamp from the local goon (who is protected by the local cops) if he has to operate after dusk. In the evening, he returns his loan to the local moneylender, with an interest rate of 5% to 10% for the day. He has to pay a rent of Rs.50 for the lamp that costs Rs.1,000. This “Ease of Doing Business” is designed to ensure he has very little savings, that his earnings are just enough to meet his basic needs, so that he cannot escape from their clutches.
My company makes LED lamps, and one of the products is solar lamps for villages. That would be an ideal fit for such street vendors. We had thought of selling these to them, but they said they did not have money to buy it. We determined a fair rent would be Rs.5 a day, and started doing that in a prominent Delhi market. Within four days, our guys were accosted by the local goons who threatened to break their bones if they were seen around again. We failed in our efforts to create Ease of Doing Business for these micro-entrepreneurs
Is there a way out for these people, trapped in debt? In Bangladesh, Mohd Yunus pioneered Micro Finance, and won a Nobel Prize for it. He was later sidelined by his Govt. In India, rural micro-finance took off, but was tripped by allegations that they charge extortionary rates of interest, between 28% to 36% per year. These local moneylenders charge 5% to 10% per day, which works out to 2,500% to 5,000% per year or more. Until “Ease of Doing Business”, the business continues..