India learns how to undercut the Chinese

Long ago, when the government proposed fast-tracking approvals for industrial projects, which used to be delayed in bureaucratic red tape, a mid-level IAS officer came up with a name for the scheme. He called it single-window agency, referring to the way applications were submitted in government offices through grilled windows. The single window was symbolic—officials of all ministries concerned and agencies would sit around a table and discuss the proposal, which included approvals for land allotment, electricity, water supply, allotment of raw materials and construction of approach roads. Thus, the proposal would go through the single window and get approval through the same one. But a senior official in the finance ministry quipped, “Will three windows accept the dominance of a single window?” He was referring to the secretaries to the government of India, who had three windows in their offices. The scepticism was whether the ministries would give up their turf to a committee that made on-the-spot decisions.

But the single-window system has been pulled out of the hat by Central and state governments several times to speed up approvals, especially after mega investment melas. A regional party with an efficient chief minister had a single suitcase system, where a suitcase to the party would green-light the project. The exclusive export zones, where there were tax and labour law holidays, have worked, especially in the IT and textile sectors. The free trade zones, launched by the United Progressive Alliance government, have languished as they were seen more as land cornering schemes.

Illustration Bhaskaran Illustration Bhaskaran

With the flow of foreign direct investment not adequate to meet the targets of the Make in India programme and with the five trillion dollar economy target, ministers are upset about the slow process of approvals, even though India has jumped up 50 places in the Ease of Doing Business Index in the last two years. But the jump was owing to the passage of business friendly laws like the Goods and Services Tax and Insolvency and Bankruptcy Code. While GST has teething problems, leading to many revisions of rates and procedures, IBC is trapped in the maze of judicial process, with the Enforcement Directorate joining in with its demands for the proceeds of bankruptcy sales. While the ED says some companies have laundered money, distressed banks say it is a party pooper.

Now the government is going to replace the window and zone concepts with a human face. The idea is borrowed from the Gujarat government, which appoints a senior officer to handle all transactions related to an industrial investment. The relationship manager, a term usually used by banks for servicing high net worth individuals, would be an all-powerful bureaucrat who will slice through red tape as if it is butter. The only catch is that the investor must come up with proposals to invest US$500 million or more. The concept is borrowed from the Chinese model where the mayor or the top party official in a city or province gives not only all approvals, but also a bonus to the investor if the project is completed ahead of schedule. When Steve Jobs wanted huge quantities of a specific type of glass for setting up the iconic Apple stores, he found that no American glass company could deliver the huge order for several years. But when he went to China, an entrepreneur promised to build new factories and ship the required bulk in the shortest possible time. Jobs was stunned.

The hope in Delhi is that replacing the red tape with red carpet will open the taps of investment from foreign companies, which are shying away from China owing to pressure from US President Donald Trump. Then our windows will have glasses—hopefully to see through the proposals!

sachi@theweek.in