Licence-raj gone, but inspector-raj still there: Raghuram Rajan

Pitching for better business environment for startups, Reserve Bank Governor Raghuram Rajan today said India has done away with the licence raj, but ‘inspector raj’ continues to some extent.

He also said that regulations should be for betterment of the industry and not to discourage entrepreneurs and suggested a system of self-certification for the industries with some checks on the part of the authorities to prevent any misuse.

Advocating an easier set of regulations for small and medium enterprises in India, Rajan gave examples of the UK and Italy saying, “We have seen that while regulations are liberal in United Kingdom, it is very heavy in Italy. It is seen that the start ups in the UK grow faster than their Italian counterparts.”

Addressing ministers, bankers, bureaucrats and other stakeholders at the 4th Odisha Knowledge Hub here, the RBI chief also said Indian economy is in the midst of recovery but some areas are still under stress.

Calling for a need to focus on the development of small and medium enterprises that require ‘hand-holding’ by the state governments and other agencies, Rajan said, “Indian economy is in the midst of recovery. However, some areas are still under stress and need to be focused in order to get them better.”

A good monsoon will be helpful for the growth of the economy, he added.

Small and medium enterprise require focused attention, the governor said and mooted setting up new institutions to finance SMEs to ensure easy access to funds.

Rajan said public sector banks have increased their credit to small and medium enterprises after RBI identified medium enterprises as priority sector and that he was optimistic about growth of start ups if provided required facilities to grow.

“Provision of easy entry and easy exit, smooth availability of finance, access to input and output market, protection from creditable taxes and healthy competition in the sector are the areas need to be focused by the planners and the governments,” Rajan said and called upon entrepreneurs to take risk under safety net.

Stating that the government needed to create a proper environment for the start ups, he said “though India has done away with the licence raj, inspector raj continues to some extent”.

Factory and boiler inspectors and other field level regulators should have adequate knowledge on the initiatives being taken by the government and RBI for the betterment of small and medium enterprises, he said.

Light regulation, he said, is very important in small and medium enterprise sector and a heavy regulation many times do not give easy entry and easy exit which is why people keep away from it.

Field level regulators must have information regarding the initiatives, he added.