Job Cre­ation, So­cial Se­cu­rity Key Is­sues in In­dia, Says Ra­jan

RBI guv also bats for eas­ier busi­ness en­vi­ron­ment for star­tups, lighter reg­u­la­tions for smaller firms

The Economic Times - - Economy: Macro, Micro & More - Joel.Re­bello@ times­

Mum­bai: Re­serve Bank of In­dia (RBI) Gov­er­nor Raghu­ram Ra­jan called job cre­ation the most im­por­tant is­sue in In­dia even as he bat­ted for an eas­ier busi­ness en­vi­ron­ment for star­tups, lighter reg­u­la­tions for small firms and bet­ter so­cial se­cu­rity.

“Jobs by star­tups and self-em­ploy­ments is the big­gest source of new jobs. The con­di­tions govern­ment is lay­ing to cre­ate a level-play­ing field is ob­vi­ous, but there are also some less ob­vi­ous con­di­tions like the pro­tec­tion of prop­erty rights and a trans­par­ent tax regime,” Ra­jan said while de­liv­er­ing the YB Cha­van me­mo­rial lec­ture.

Ra­jan once again touched on eas­ier en­try and exit rules, es­pe­cially for smaller com­pa­nies which are bur­dened by heavy reg­u­la­tions both while start­ing as well as clos­ing down busi­nesses.

“Eas­ier busi­ness en­vi­ron­ment is not just im­por­tant from an eco­nomic growth per­spec­tive but also on a so­cial ba­sis. A favourable busi­ness en­vi­ron­ment also helps the so­cial en­vi­ron­ment,” he said. Eas­ier reg­u­la­tions would also lead to more Dalit en­trepreneurs start­ing their own busi­nesses, he added.

Cit­ing a study that com­pared the startup en­vi­ron­ment in Italy and the UK, he said: “In Italy, star­tups start much big­ger than the UK but UK firms be­come much big­ger com­pared to the Ital­ian firms be­cause in Italy, you have many reg­u­la­tions on small firms, while the UK has lighter reg­u­la­tions.”

RBI is try­ing to make reg­u­la­tions sim­pler by is­su­ing master cir­cu­lars ag­gre­gat­ing scat­tered rules, and re­mov­ing old reg­u­la­tions which have be­come re­dun­dant but still in the statute, Ra­jan said.

RBI’s li­cences to new banks that will lend to small busi­ness will hope­fully en­sure that fund­ing reaches th­ese com­pa­nies, he said. “Ac­cess to fi­nance is the sin­gle big­gest com­plaint for th­ese small firms. They say banks won’t talk to us. I hope the change in tech­nol­ogy and new in­sti­tu­tions will help a great deal.” The next year could see as many as 18 new banks open­ing shop in the form of pay­ments banks and small banks. “My hope is that the new gen­er­a­tion of small fi­nance banks can cre­ate a rev­o­lu­tion in small lend­ing,” he said. “Ur­ban co­op­er­a­tive banks and re­gional ru­ral banks can also be en­listed in this process.”

While many ef­forts are be­ing taken by the govern­ment and the reg­u­la­tor, life should still get eas­ier to exit a busi­ness, too, if the pro­moter wants to cut the losses and move on.

“It is easy to get into busi­ness but very hard to close a busi­ness,” he sa-


id. “In my trav­els across the country, in in­dus­trial parks, I have seen empty sheds of old firms which are not al­lowed to die. We need a cheap and quick exit pol­icy. A lot of small firms fail, and it’s not a bad thing.”

Ra­jan said con­ven­tional vo­ca­tional train­ing cour­ses may not be suf­fi­cient and that they need to be up­graded to meet the mod­ern day de­mands.

“We need to ex­pand peo­ple skills in In­dia,” he said. “Dalit en­trepreneurs that I have met have not come from IITs or the IIMs but through vo­ca­tional train­ing cour­ses. Things like elec­tri­cal and wield­ing works are not easy to do, es­pe­cially with mod­ern ma­chin­ery.” While many steps have been taken, so­cial se­cu­rity needs to be im­proved, though they should not be at the ex­pense of mak­ing peo­ple lazy, the RBI gov­er­nor said.


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