Biggest constraint to doing business in the country is poor contract enforcement, and the blame for the same rests mostly with the government, a top finance ministry official said on November 26.
The government delays payments or does not deliver on promises made earlier, posing challenges to businesses, principal economic advisor to the finance minister Sanjeev Sanyal said.
Even as we have leapfrogged on the overall ease of doing business ranking, we are still ranked 163rd among 190 countries when it comes to enforcing contract, and only "dysfunctional and war-affected" countries follow us, he said.
"The biggest constraint to doing business in our country is simply the business of enforcing contracts. Unfortunately, many people have whined about it for long, but very little actual thinking has gone into it," Sanyal told an event organised by impact investing firm Aavishkar.
The economist-turned-policymaker sought to take the blame for the same onto the government.
"In many cases, the poverty of contract enforcement relates not to two private parties, but the government which is violating these contracts," he said, adding this happens as both the Centre and the states "violate" honouring payments or other commitments.
He assured that the present government is working on these issues through interventions like ensuring the timely payments to vendors.
"If the role of the state is to be the real sovereign, then the word of the sovereign has to be printed in gold," Sanyal quipped.
Other factors that plague proper and timely contract enforcement is the justice system, which is saddled with 35 million cases and it takes over a decade to get a case solved that too "if one is lucky", he said.
Stating that our regulations are "very complicated", Sanyal said, "what can be a simple regulation in other country becomes very complicated and bureaucratic here because what we are trying to do is to anticipate every possible thing that can possibly go wrong and then write some rules for preventing that to happen."
On aspects like the sustainable developmental goals, he said there is a need to "indigenise" such ideas before they are implemented on the ground.
Disclosing that he was among the early backers of Aavishkar while being in Singapore, Sanyal said the impact investing industry needs to think of scale and expose itself to the rigours of academic scrutiny for better documentation to ensure success.