Contributed by Pradeep Kumar

India ranks 46th out of 53 countries in aiding SME growth. Though this may not come as a surprise to us, it should atleast make us think. When there is so much talk going on about SME’s like this and this why is it that we still rank 46th out of 53 countries. If the case was about rank of Indian SME’s among other countries its another issue since we have a long way to go anyway. However, the ranking was based on to what extent the government “supports” the SME’s and we have come a meagre 46th in it.

The main problems facing the SME sector, which everyone knows, is the problem of capital availability for their growth. However there is another silent problem. The problem of the outdated and archaic labour laws which makes it extremely difficult for entrepreneurs to start businesses and the ones already started, in running them. The body of legislation that shapes the industrial and labour environment in India is huge.For e.g. here is a minuscule sampler: Minimum Wages Act, 1948; Trade Unions Act, 1926; Contract Labour Act, 1970; Weekly Holidays Act, 1942; Beedi and Cigar Workers Act, 1966. These and much more form a crisscrossing network of chaotic and often-contradictory laws that are crying out for overhaul. Lets take an example of a company interested in shutting down its operations. According to the Industrial Disputes Act, 1947, any company which employs more than 100 people and wants to close down, needs to get a permission from the state government and practically such permissions are not given. The issue of closing down a company goes on for years and the entrepreneur or the founder is stuck in a legal mess. Now, does that mean that we need to shift to the hire and fire methodology of employing people?

No, that cannot be the solution. The solution for this problem is not simple. However, there are certain means through which the process can be streamlined. Many representing the SME have been advocating a single window approval agency in India for opening up a company. Though there has been lots of lip service on the same, no concrete efforts have been taken.

We will discuss more on this in our further series.