India needs to address the various difficulties that companies face in starting, running and exiting a business. There are too many regulations and permissions that businesses need to take care of, said Arvind Datar, Senior Advocate and author.

For instance, a firm requires 58 permissions to start a business in Maharashtra. A company from Singapore which wanted to start a five-star hotel in India found it needed 116 different types of permissions compared with just 11 in Singapore.

“We must address these kind of difficulties,” he said, participating in a discussion organised by Chennai International Centre on ‘What Comes First? - Better Law or Better Economy?’

For a potential investor, law always comes first, only then the economy, he said.

However, one interesting and modern trend led by Andhra Pradesh and Telengana is that they have made it a point to clear everything in 30-45 days. If this picks up momentum, it will be good for the industry, he said.

Target system

The biggest curse today is the revenue target to be met by various tax-collecting departments. This is indirectly affecting companies. If an IT officer in Tamil Nadu needs to meet a ₹400-core target, he will raise demand from large assessees. The officer meets the target by demand, while the money need not come. By the time the matter goes to the court, in five years, the demand is dropped, he said.

Vikramaditya Khanna, William W Cook Professor of Law, University of Michigan Law School, said if a US-based company is planning to have a joint venture with an Indian company, one of the clauses in the agreement is to deposit a certain amount in an escrow account in a third country. This is only a safeguard against a possible dispute between the two companies. If an arbitration is triggered, the parties know that this much of assets have been put in an another country, he said.

The conversation was moderated by Aarthi Sivanandh, Partner, J Sagar Associates.

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