Process Reforms | Economic Survey & Government Reports - UPSC PDF Download

 Page 1


CHAPTER
06
International comparisons show that the problems of India’s administrative processes 
derive less from lack of compliance to processes or regulatory standards, but from over-
regulation. In this chapter, the issue of over-regulation is illustrated through a study of 
time and procedures taken for a company to undergo voluntary liquidation in India.  Even 
when there is no dispute/ litigation and all paperwork is complete, it takes 1570 days to 
be stuck off from the records. This is an order of magnitude longer than what it takes in 
other countries. 
Using the framework of incomplete contracts, the chapter argues that the problem of 
over-regulation and opacity in Indian administrative processes flows from the emphasis 
on having complete regulations that account for every possible outcome. This is due to the 
inadequate appreciation of the difference between ‘Regulation’ and ‘Supervision’, on the 
one hand, and the inevitability of incomplete regulations, on the other hand. Real-world 
regulation is inevitably incomplete because of the combination of: (i) bounded rationality 
due to “unknown unknowns”, (ii) complexity involved in framing “complete” contracts 
across all possible contingencies, and (iii) the difficulty for a third party to verify decisions. 
This makes some discretion unavoidable in decision making. The evidence shows that 
over-regulation, not simpler regulation, leads to opaque decision making.
The problem is that policymakers, by default, tend to favour prescriptive regulation over 
supervision. Unlike supervision, regulation can be easily measured. After all, regulations 
provide criteria or checklists, making it easier for regulators to follow and reduce their 
accountability later on. In contrast, it is difficult to quantify the amount and quality of 
supervision. 
The optimal solution is to have simple regulations combined with transparent decision-
making process. Having provided the government decision maker with discretion, it is 
important then to balance it with three things- improved transparency, stronger systems 
of ex-ante accountability (such as bank boards) and ex-post resolution mechanisms. As 
an illustration, the chapter shows how the new Government e Marketplace (GeM portal) 
has increased the transparency in pricing in government procurement. This has not only 
reduced the cost of procurement but has also made it easier for the honest government 
official to make decisions.
Process Reforms: Enabling 
decision-making under uncertainty
Page 2


CHAPTER
06
International comparisons show that the problems of India’s administrative processes 
derive less from lack of compliance to processes or regulatory standards, but from over-
regulation. In this chapter, the issue of over-regulation is illustrated through a study of 
time and procedures taken for a company to undergo voluntary liquidation in India.  Even 
when there is no dispute/ litigation and all paperwork is complete, it takes 1570 days to 
be stuck off from the records. This is an order of magnitude longer than what it takes in 
other countries. 
Using the framework of incomplete contracts, the chapter argues that the problem of 
over-regulation and opacity in Indian administrative processes flows from the emphasis 
on having complete regulations that account for every possible outcome. This is due to the 
inadequate appreciation of the difference between ‘Regulation’ and ‘Supervision’, on the 
one hand, and the inevitability of incomplete regulations, on the other hand. Real-world 
regulation is inevitably incomplete because of the combination of: (i) bounded rationality 
due to “unknown unknowns”, (ii) complexity involved in framing “complete” contracts 
across all possible contingencies, and (iii) the difficulty for a third party to verify decisions. 
This makes some discretion unavoidable in decision making. The evidence shows that 
over-regulation, not simpler regulation, leads to opaque decision making.
The problem is that policymakers, by default, tend to favour prescriptive regulation over 
supervision. Unlike supervision, regulation can be easily measured. After all, regulations 
provide criteria or checklists, making it easier for regulators to follow and reduce their 
accountability later on. In contrast, it is difficult to quantify the amount and quality of 
supervision. 
The optimal solution is to have simple regulations combined with transparent decision-
making process. Having provided the government decision maker with discretion, it is 
important then to balance it with three things- improved transparency, stronger systems 
of ex-ante accountability (such as bank boards) and ex-post resolution mechanisms. As 
an illustration, the chapter shows how the new Government e Marketplace (GeM portal) 
has increased the transparency in pricing in government procurement. This has not only 
reduced the cost of procurement but has also made it easier for the honest government 
official to make decisions.
Process Reforms: Enabling 
decision-making under uncertainty
180 Economic Survey 2020-21   V olume 1
THE PROBLEM OF REGULATORY EFFECTIVENESS
6.1 It is often believed that India’s regulatory problems are due to the lack of regulatory 
standards and poor compliance to process. International comparisons, however, show that India 
ranks better than its peers on having regulatory standards in place and compliance to process. 
The real issue seems to be effectiveness of regulations caused by undue delays, rent seeking, 
complex regulations and quality of regulation.
6.2 The ‘World Rule of Law Index’ published by the World Justice Project
1
 provides cross 
country comparison on various aspects of regulatory enforcement. The index has various 
sub-categories, which capture compliance to due processes, effectiveness, timelines, etc. In 
2020, India’s rank is 45 out of 128 countries in the category of ‘Due process is respected in 
administrative proceedings’ (proxy for following due process). In contrast, in the category 
‘Government regulations are effectively enforced’ (proxy for regulatory quality/effectiveness), 
the country’s rank is 104 (Table 1). India stands at 89
th
 rank in ‘Administrative Proceedings 
are conducted without unreasonable delay’ (proxy for timeliness) and 107
th
 in ‘Administrative 
Proceedings are applied and enforced without improper influence’ (proxy for rent seeking). This  
shows that, contrary to the popular belief, India is relatively good at complying with processes, 
but lag in regulatory effectiveness. 
6.3 In fact, India’s performance has improved significantly in following due process in 
administrative proceedings, with its rank improving from 72 in 2015 (out of 102 countries) 
to 45 in 2020 (out of 128 countries). In contrast, it has deteriorated over time on certain other 
parameters. This makes it clear that having regulations and enforcing process is one thing, 
whereas their effectiveness is another. 
Table 1: India’s rank in various categories of regulatory enforcement 
2015 2020
Regulatory Enforcement  overall rank 69 74
Government regulations are effectively enforced 87 104
Government regulations are applied and enforced without improper influence 74 107
Administrative proceedings are conducted without unreasonable delay 75 89
Due process is respected in administrative proceedings 72 45
Number of Countries 102 128
Source: World Justice Project
6.4 The index shows that United Kingdom, United States, Singapore and Canada are placed 
much better than India in case of both, following due process and regulatory effectiveness. 
However, the gap between India and these counties is much wider in regulatory effectiveness 
than in due processes being followed. Similarly, India is placed better than other BRICS 
countries (barring South Africa) in terms of respecting due process, but, worse than them in the 
effectiveness of those standards (Table 2). 
1 
 World Justice Project was found in 2006 as an initiative of the American Bar Association and became an 
independent Non-Profit organisation in 2009. The data published by World Justice Project is used by World Bank 
in its World Governance Indicators.
Page 3


CHAPTER
06
International comparisons show that the problems of India’s administrative processes 
derive less from lack of compliance to processes or regulatory standards, but from over-
regulation. In this chapter, the issue of over-regulation is illustrated through a study of 
time and procedures taken for a company to undergo voluntary liquidation in India.  Even 
when there is no dispute/ litigation and all paperwork is complete, it takes 1570 days to 
be stuck off from the records. This is an order of magnitude longer than what it takes in 
other countries. 
Using the framework of incomplete contracts, the chapter argues that the problem of 
over-regulation and opacity in Indian administrative processes flows from the emphasis 
on having complete regulations that account for every possible outcome. This is due to the 
inadequate appreciation of the difference between ‘Regulation’ and ‘Supervision’, on the 
one hand, and the inevitability of incomplete regulations, on the other hand. Real-world 
regulation is inevitably incomplete because of the combination of: (i) bounded rationality 
due to “unknown unknowns”, (ii) complexity involved in framing “complete” contracts 
across all possible contingencies, and (iii) the difficulty for a third party to verify decisions. 
This makes some discretion unavoidable in decision making. The evidence shows that 
over-regulation, not simpler regulation, leads to opaque decision making.
The problem is that policymakers, by default, tend to favour prescriptive regulation over 
supervision. Unlike supervision, regulation can be easily measured. After all, regulations 
provide criteria or checklists, making it easier for regulators to follow and reduce their 
accountability later on. In contrast, it is difficult to quantify the amount and quality of 
supervision. 
The optimal solution is to have simple regulations combined with transparent decision-
making process. Having provided the government decision maker with discretion, it is 
important then to balance it with three things- improved transparency, stronger systems 
of ex-ante accountability (such as bank boards) and ex-post resolution mechanisms. As 
an illustration, the chapter shows how the new Government e Marketplace (GeM portal) 
has increased the transparency in pricing in government procurement. This has not only 
reduced the cost of procurement but has also made it easier for the honest government 
official to make decisions.
Process Reforms: Enabling 
decision-making under uncertainty
180 Economic Survey 2020-21   V olume 1
THE PROBLEM OF REGULATORY EFFECTIVENESS
6.1 It is often believed that India’s regulatory problems are due to the lack of regulatory 
standards and poor compliance to process. International comparisons, however, show that India 
ranks better than its peers on having regulatory standards in place and compliance to process. 
The real issue seems to be effectiveness of regulations caused by undue delays, rent seeking, 
complex regulations and quality of regulation.
6.2 The ‘World Rule of Law Index’ published by the World Justice Project
1
 provides cross 
country comparison on various aspects of regulatory enforcement. The index has various 
sub-categories, which capture compliance to due processes, effectiveness, timelines, etc. In 
2020, India’s rank is 45 out of 128 countries in the category of ‘Due process is respected in 
administrative proceedings’ (proxy for following due process). In contrast, in the category 
‘Government regulations are effectively enforced’ (proxy for regulatory quality/effectiveness), 
the country’s rank is 104 (Table 1). India stands at 89
th
 rank in ‘Administrative Proceedings 
are conducted without unreasonable delay’ (proxy for timeliness) and 107
th
 in ‘Administrative 
Proceedings are applied and enforced without improper influence’ (proxy for rent seeking). This  
shows that, contrary to the popular belief, India is relatively good at complying with processes, 
but lag in regulatory effectiveness. 
6.3 In fact, India’s performance has improved significantly in following due process in 
administrative proceedings, with its rank improving from 72 in 2015 (out of 102 countries) 
to 45 in 2020 (out of 128 countries). In contrast, it has deteriorated over time on certain other 
parameters. This makes it clear that having regulations and enforcing process is one thing, 
whereas their effectiveness is another. 
Table 1: India’s rank in various categories of regulatory enforcement 
2015 2020
Regulatory Enforcement  overall rank 69 74
Government regulations are effectively enforced 87 104
Government regulations are applied and enforced without improper influence 74 107
Administrative proceedings are conducted without unreasonable delay 75 89
Due process is respected in administrative proceedings 72 45
Number of Countries 102 128
Source: World Justice Project
6.4 The index shows that United Kingdom, United States, Singapore and Canada are placed 
much better than India in case of both, following due process and regulatory effectiveness. 
However, the gap between India and these counties is much wider in regulatory effectiveness 
than in due processes being followed. Similarly, India is placed better than other BRICS 
countries (barring South Africa) in terms of respecting due process, but, worse than them in the 
effectiveness of those standards (Table 2). 
1 
 World Justice Project was found in 2006 as an initiative of the American Bar Association and became an 
independent Non-Profit organisation in 2009. The data published by World Justice Project is used by World Bank 
in its World Governance Indicators.
181 Process Reforms: Enabling decision-making under uncertainty
Table 2: Comparison of regulatory standards and regulatory enforcement in 2020
Rank US UK Singapore Canada Brazil Russia China South 
Africa
India
Regulatory Enforcement 20 13 3 11 60 73 67 45 74
Government regulations 
are effectively enforced
20 11 5 12 62 47 63 92 104
Government regulations 
are applied and enforced 
without improper influence
16 9 4 8 64 83 63 59 107
Administrative 
proceedings are conducted 
without unreasonable delay
33 13 1 17 124 24 23 48 89
Due process is respected in 
administrative proceedings
18 12 7 5 55 97 98 25 45
Source: World Justice Project (2020)
6.5 The same conclusion can be derived from various World Bank studies. Its Regulatory 
Quality Index
2
 shows that despite improvement in India’s regulatory quality since 2013 
(Figure 1), it is still much lower than UK, US, Singapore, Japan etc. (Figure 2). Similarly, 
the World Bank’s Ease of Doing Business (EoDB) report (2020) shows that despite making 
huge strides in the overall EoDB rank, India still lags behind in the sub-categories ‘Starting a 
business’ and ‘Registering Property’ where the country’s rank is 136 and 154 respectively. The 
report points out that this is due to the high number of procedures required to legally start and 
formally operate a company as well as the time and cost consumed to complete each procedure.
Figure 1: Regulatory Quality 
in India
Figure 2: Cross country comparison 
of regulatory quality (as of 2019)
 
25
30
35
40
45
50
1996
2000
2003
2005
2007
2009
2011
2013
2015
2017
2019
Percentile rank
 
0
10
20
30
40
50
60
70
80
90
100
Singapore
Canada
U K
US
South Africa
India
B ra z il
China
Russia
Percentile rank
Source: World Bank (2019)
Note: In Figure 1 and 2, higher number indicates improvement (unlike in other rankings)
2
Regulatory Quality captures perceptions of the ability of the government to formulate and implement sound poli-
cies and regulations that permit and promote private sector development. Estimate gives the country’s score on the 
aggregate indicator, in units of a standard normal distribution, i.e. ranging from approximately -2.5 to 2.5. This is 
a part of Worldwide Governance Indicators (WGI) of World Bank.
Page 4


CHAPTER
06
International comparisons show that the problems of India’s administrative processes 
derive less from lack of compliance to processes or regulatory standards, but from over-
regulation. In this chapter, the issue of over-regulation is illustrated through a study of 
time and procedures taken for a company to undergo voluntary liquidation in India.  Even 
when there is no dispute/ litigation and all paperwork is complete, it takes 1570 days to 
be stuck off from the records. This is an order of magnitude longer than what it takes in 
other countries. 
Using the framework of incomplete contracts, the chapter argues that the problem of 
over-regulation and opacity in Indian administrative processes flows from the emphasis 
on having complete regulations that account for every possible outcome. This is due to the 
inadequate appreciation of the difference between ‘Regulation’ and ‘Supervision’, on the 
one hand, and the inevitability of incomplete regulations, on the other hand. Real-world 
regulation is inevitably incomplete because of the combination of: (i) bounded rationality 
due to “unknown unknowns”, (ii) complexity involved in framing “complete” contracts 
across all possible contingencies, and (iii) the difficulty for a third party to verify decisions. 
This makes some discretion unavoidable in decision making. The evidence shows that 
over-regulation, not simpler regulation, leads to opaque decision making.
The problem is that policymakers, by default, tend to favour prescriptive regulation over 
supervision. Unlike supervision, regulation can be easily measured. After all, regulations 
provide criteria or checklists, making it easier for regulators to follow and reduce their 
accountability later on. In contrast, it is difficult to quantify the amount and quality of 
supervision. 
The optimal solution is to have simple regulations combined with transparent decision-
making process. Having provided the government decision maker with discretion, it is 
important then to balance it with three things- improved transparency, stronger systems 
of ex-ante accountability (such as bank boards) and ex-post resolution mechanisms. As 
an illustration, the chapter shows how the new Government e Marketplace (GeM portal) 
has increased the transparency in pricing in government procurement. This has not only 
reduced the cost of procurement but has also made it easier for the honest government 
official to make decisions.
Process Reforms: Enabling 
decision-making under uncertainty
180 Economic Survey 2020-21   V olume 1
THE PROBLEM OF REGULATORY EFFECTIVENESS
6.1 It is often believed that India’s regulatory problems are due to the lack of regulatory 
standards and poor compliance to process. International comparisons, however, show that India 
ranks better than its peers on having regulatory standards in place and compliance to process. 
The real issue seems to be effectiveness of regulations caused by undue delays, rent seeking, 
complex regulations and quality of regulation.
6.2 The ‘World Rule of Law Index’ published by the World Justice Project
1
 provides cross 
country comparison on various aspects of regulatory enforcement. The index has various 
sub-categories, which capture compliance to due processes, effectiveness, timelines, etc. In 
2020, India’s rank is 45 out of 128 countries in the category of ‘Due process is respected in 
administrative proceedings’ (proxy for following due process). In contrast, in the category 
‘Government regulations are effectively enforced’ (proxy for regulatory quality/effectiveness), 
the country’s rank is 104 (Table 1). India stands at 89
th
 rank in ‘Administrative Proceedings 
are conducted without unreasonable delay’ (proxy for timeliness) and 107
th
 in ‘Administrative 
Proceedings are applied and enforced without improper influence’ (proxy for rent seeking). This  
shows that, contrary to the popular belief, India is relatively good at complying with processes, 
but lag in regulatory effectiveness. 
6.3 In fact, India’s performance has improved significantly in following due process in 
administrative proceedings, with its rank improving from 72 in 2015 (out of 102 countries) 
to 45 in 2020 (out of 128 countries). In contrast, it has deteriorated over time on certain other 
parameters. This makes it clear that having regulations and enforcing process is one thing, 
whereas their effectiveness is another. 
Table 1: India’s rank in various categories of regulatory enforcement 
2015 2020
Regulatory Enforcement  overall rank 69 74
Government regulations are effectively enforced 87 104
Government regulations are applied and enforced without improper influence 74 107
Administrative proceedings are conducted without unreasonable delay 75 89
Due process is respected in administrative proceedings 72 45
Number of Countries 102 128
Source: World Justice Project
6.4 The index shows that United Kingdom, United States, Singapore and Canada are placed 
much better than India in case of both, following due process and regulatory effectiveness. 
However, the gap between India and these counties is much wider in regulatory effectiveness 
than in due processes being followed. Similarly, India is placed better than other BRICS 
countries (barring South Africa) in terms of respecting due process, but, worse than them in the 
effectiveness of those standards (Table 2). 
1 
 World Justice Project was found in 2006 as an initiative of the American Bar Association and became an 
independent Non-Profit organisation in 2009. The data published by World Justice Project is used by World Bank 
in its World Governance Indicators.
181 Process Reforms: Enabling decision-making under uncertainty
Table 2: Comparison of regulatory standards and regulatory enforcement in 2020
Rank US UK Singapore Canada Brazil Russia China South 
Africa
India
Regulatory Enforcement 20 13 3 11 60 73 67 45 74
Government regulations 
are effectively enforced
20 11 5 12 62 47 63 92 104
Government regulations 
are applied and enforced 
without improper influence
16 9 4 8 64 83 63 59 107
Administrative 
proceedings are conducted 
without unreasonable delay
33 13 1 17 124 24 23 48 89
Due process is respected in 
administrative proceedings
18 12 7 5 55 97 98 25 45
Source: World Justice Project (2020)
6.5 The same conclusion can be derived from various World Bank studies. Its Regulatory 
Quality Index
2
 shows that despite improvement in India’s regulatory quality since 2013 
(Figure 1), it is still much lower than UK, US, Singapore, Japan etc. (Figure 2). Similarly, 
the World Bank’s Ease of Doing Business (EoDB) report (2020) shows that despite making 
huge strides in the overall EoDB rank, India still lags behind in the sub-categories ‘Starting a 
business’ and ‘Registering Property’ where the country’s rank is 136 and 154 respectively. The 
report points out that this is due to the high number of procedures required to legally start and 
formally operate a company as well as the time and cost consumed to complete each procedure.
Figure 1: Regulatory Quality 
in India
Figure 2: Cross country comparison 
of regulatory quality (as of 2019)
 
25
30
35
40
45
50
1996
2000
2003
2005
2007
2009
2011
2013
2015
2017
2019
Percentile rank
 
0
10
20
30
40
50
60
70
80
90
100
Singapore
Canada
U K
US
South Africa
India
B ra z il
China
Russia
Percentile rank
Source: World Bank (2019)
Note: In Figure 1 and 2, higher number indicates improvement (unlike in other rankings)
2
Regulatory Quality captures perceptions of the ability of the government to formulate and implement sound poli-
cies and regulations that permit and promote private sector development. Estimate gives the country’s score on the 
aggregate indicator, in units of a standard normal distribution, i.e. ranging from approximately -2.5 to 2.5. This is 
a part of Worldwide Governance Indicators (WGI) of World Bank.
182 Economic Survey 2020-21   V olume 1
6.6 As an illustration of unnecessary regulation in India, take the case of voluntary closure 
of a company. A study by Quality Council of India (done for Economic Survey) shows that the 
time taken from point of decision of closure to actually the company getting struck off from the 
Registrar of Companies is 1570 days (i.e. 4.3 years), even if all paperwork is in place and the 
company is not involved in any litigation or dispute. This is the best possible case of a routine 
activity. Interestingly, out of the total time taken, about 1035 days are taken for clearances by 
Income Tax, Provident Fund, GST departments and in taking back security refunds from various 
departments (Table 3). In contrast, voluntary liquidation takes about 12 months in Singapore, 12-
24 months in Germany and 15 months in UK. In Germany, for very large and active companies, 
it takes 2-4 years.  Given the likelihood of disputes and litigation, for the comparable large cases 
it may take upto a decade in India.
Table 3: Timelines and procedures faced by companies in voluntary 
liquidation in India (even when there is no litigation/dispute)
Timeline 
(days)
Procedures
T Company’s decision to close its business operations in India
T +16 Passing of Board resolution by the Company to close its business operations in India
T + 20
to
T + 70
Public announcement, communication to employees and strategizing transition of legal 
entity to liquidator 
T + 70
to 
T + 110
 • Exit by majority of employees; Communication to vendors
 • Identification of physical data and records and Digitization of key physical records
 • Introduction of professional firm for bookkeeping activity going forward
 • Undertaking sale/ realization and disposal of movable assets
T + 110
to
T + 200
 • Discontinuance of business operations and termination of contracts
 • Intimating income tax authorities 
 • Exit by remaining key employees; Completion of asset disposal process
 • Completion of identified pending statutory compliances and closure process with 
government bodies monitoring industrial functions.
 • seeking no dues certificate from all the vendors 
 • Identification and appointment of resident Indian director during the period of 
voluntary liquidation process till the order for dissolution is passed by NCLT*
T + 200
to
T + 270
 • Appointment of new Board members including Indian resident Director*
 • Cessation of banking operations in existing bank accounts to mitigate risk of financial 
misappropriation 
 • Undertaking compliances under secretarial law and IBC, towards commencement of 
voluntary liquidation
T + 270 • Passing of shareholder’s resolution for commencement of voluntary liquidation and 
appointment of liquidator
Page 5


CHAPTER
06
International comparisons show that the problems of India’s administrative processes 
derive less from lack of compliance to processes or regulatory standards, but from over-
regulation. In this chapter, the issue of over-regulation is illustrated through a study of 
time and procedures taken for a company to undergo voluntary liquidation in India.  Even 
when there is no dispute/ litigation and all paperwork is complete, it takes 1570 days to 
be stuck off from the records. This is an order of magnitude longer than what it takes in 
other countries. 
Using the framework of incomplete contracts, the chapter argues that the problem of 
over-regulation and opacity in Indian administrative processes flows from the emphasis 
on having complete regulations that account for every possible outcome. This is due to the 
inadequate appreciation of the difference between ‘Regulation’ and ‘Supervision’, on the 
one hand, and the inevitability of incomplete regulations, on the other hand. Real-world 
regulation is inevitably incomplete because of the combination of: (i) bounded rationality 
due to “unknown unknowns”, (ii) complexity involved in framing “complete” contracts 
across all possible contingencies, and (iii) the difficulty for a third party to verify decisions. 
This makes some discretion unavoidable in decision making. The evidence shows that 
over-regulation, not simpler regulation, leads to opaque decision making.
The problem is that policymakers, by default, tend to favour prescriptive regulation over 
supervision. Unlike supervision, regulation can be easily measured. After all, regulations 
provide criteria or checklists, making it easier for regulators to follow and reduce their 
accountability later on. In contrast, it is difficult to quantify the amount and quality of 
supervision. 
The optimal solution is to have simple regulations combined with transparent decision-
making process. Having provided the government decision maker with discretion, it is 
important then to balance it with three things- improved transparency, stronger systems 
of ex-ante accountability (such as bank boards) and ex-post resolution mechanisms. As 
an illustration, the chapter shows how the new Government e Marketplace (GeM portal) 
has increased the transparency in pricing in government procurement. This has not only 
reduced the cost of procurement but has also made it easier for the honest government 
official to make decisions.
Process Reforms: Enabling 
decision-making under uncertainty
180 Economic Survey 2020-21   V olume 1
THE PROBLEM OF REGULATORY EFFECTIVENESS
6.1 It is often believed that India’s regulatory problems are due to the lack of regulatory 
standards and poor compliance to process. International comparisons, however, show that India 
ranks better than its peers on having regulatory standards in place and compliance to process. 
The real issue seems to be effectiveness of regulations caused by undue delays, rent seeking, 
complex regulations and quality of regulation.
6.2 The ‘World Rule of Law Index’ published by the World Justice Project
1
 provides cross 
country comparison on various aspects of regulatory enforcement. The index has various 
sub-categories, which capture compliance to due processes, effectiveness, timelines, etc. In 
2020, India’s rank is 45 out of 128 countries in the category of ‘Due process is respected in 
administrative proceedings’ (proxy for following due process). In contrast, in the category 
‘Government regulations are effectively enforced’ (proxy for regulatory quality/effectiveness), 
the country’s rank is 104 (Table 1). India stands at 89
th
 rank in ‘Administrative Proceedings 
are conducted without unreasonable delay’ (proxy for timeliness) and 107
th
 in ‘Administrative 
Proceedings are applied and enforced without improper influence’ (proxy for rent seeking). This  
shows that, contrary to the popular belief, India is relatively good at complying with processes, 
but lag in regulatory effectiveness. 
6.3 In fact, India’s performance has improved significantly in following due process in 
administrative proceedings, with its rank improving from 72 in 2015 (out of 102 countries) 
to 45 in 2020 (out of 128 countries). In contrast, it has deteriorated over time on certain other 
parameters. This makes it clear that having regulations and enforcing process is one thing, 
whereas their effectiveness is another. 
Table 1: India’s rank in various categories of regulatory enforcement 
2015 2020
Regulatory Enforcement  overall rank 69 74
Government regulations are effectively enforced 87 104
Government regulations are applied and enforced without improper influence 74 107
Administrative proceedings are conducted without unreasonable delay 75 89
Due process is respected in administrative proceedings 72 45
Number of Countries 102 128
Source: World Justice Project
6.4 The index shows that United Kingdom, United States, Singapore and Canada are placed 
much better than India in case of both, following due process and regulatory effectiveness. 
However, the gap between India and these counties is much wider in regulatory effectiveness 
than in due processes being followed. Similarly, India is placed better than other BRICS 
countries (barring South Africa) in terms of respecting due process, but, worse than them in the 
effectiveness of those standards (Table 2). 
1 
 World Justice Project was found in 2006 as an initiative of the American Bar Association and became an 
independent Non-Profit organisation in 2009. The data published by World Justice Project is used by World Bank 
in its World Governance Indicators.
181 Process Reforms: Enabling decision-making under uncertainty
Table 2: Comparison of regulatory standards and regulatory enforcement in 2020
Rank US UK Singapore Canada Brazil Russia China South 
Africa
India
Regulatory Enforcement 20 13 3 11 60 73 67 45 74
Government regulations 
are effectively enforced
20 11 5 12 62 47 63 92 104
Government regulations 
are applied and enforced 
without improper influence
16 9 4 8 64 83 63 59 107
Administrative 
proceedings are conducted 
without unreasonable delay
33 13 1 17 124 24 23 48 89
Due process is respected in 
administrative proceedings
18 12 7 5 55 97 98 25 45
Source: World Justice Project (2020)
6.5 The same conclusion can be derived from various World Bank studies. Its Regulatory 
Quality Index
2
 shows that despite improvement in India’s regulatory quality since 2013 
(Figure 1), it is still much lower than UK, US, Singapore, Japan etc. (Figure 2). Similarly, 
the World Bank’s Ease of Doing Business (EoDB) report (2020) shows that despite making 
huge strides in the overall EoDB rank, India still lags behind in the sub-categories ‘Starting a 
business’ and ‘Registering Property’ where the country’s rank is 136 and 154 respectively. The 
report points out that this is due to the high number of procedures required to legally start and 
formally operate a company as well as the time and cost consumed to complete each procedure.
Figure 1: Regulatory Quality 
in India
Figure 2: Cross country comparison 
of regulatory quality (as of 2019)
 
25
30
35
40
45
50
1996
2000
2003
2005
2007
2009
2011
2013
2015
2017
2019
Percentile rank
 
0
10
20
30
40
50
60
70
80
90
100
Singapore
Canada
U K
US
South Africa
India
B ra z il
China
Russia
Percentile rank
Source: World Bank (2019)
Note: In Figure 1 and 2, higher number indicates improvement (unlike in other rankings)
2
Regulatory Quality captures perceptions of the ability of the government to formulate and implement sound poli-
cies and regulations that permit and promote private sector development. Estimate gives the country’s score on the 
aggregate indicator, in units of a standard normal distribution, i.e. ranging from approximately -2.5 to 2.5. This is 
a part of Worldwide Governance Indicators (WGI) of World Bank.
182 Economic Survey 2020-21   V olume 1
6.6 As an illustration of unnecessary regulation in India, take the case of voluntary closure 
of a company. A study by Quality Council of India (done for Economic Survey) shows that the 
time taken from point of decision of closure to actually the company getting struck off from the 
Registrar of Companies is 1570 days (i.e. 4.3 years), even if all paperwork is in place and the 
company is not involved in any litigation or dispute. This is the best possible case of a routine 
activity. Interestingly, out of the total time taken, about 1035 days are taken for clearances by 
Income Tax, Provident Fund, GST departments and in taking back security refunds from various 
departments (Table 3). In contrast, voluntary liquidation takes about 12 months in Singapore, 12-
24 months in Germany and 15 months in UK. In Germany, for very large and active companies, 
it takes 2-4 years.  Given the likelihood of disputes and litigation, for the comparable large cases 
it may take upto a decade in India.
Table 3: Timelines and procedures faced by companies in voluntary 
liquidation in India (even when there is no litigation/dispute)
Timeline 
(days)
Procedures
T Company’s decision to close its business operations in India
T +16 Passing of Board resolution by the Company to close its business operations in India
T + 20
to
T + 70
Public announcement, communication to employees and strategizing transition of legal 
entity to liquidator 
T + 70
to 
T + 110
 • Exit by majority of employees; Communication to vendors
 • Identification of physical data and records and Digitization of key physical records
 • Introduction of professional firm for bookkeeping activity going forward
 • Undertaking sale/ realization and disposal of movable assets
T + 110
to
T + 200
 • Discontinuance of business operations and termination of contracts
 • Intimating income tax authorities 
 • Exit by remaining key employees; Completion of asset disposal process
 • Completion of identified pending statutory compliances and closure process with 
government bodies monitoring industrial functions.
 • seeking no dues certificate from all the vendors 
 • Identification and appointment of resident Indian director during the period of 
voluntary liquidation process till the order for dissolution is passed by NCLT*
T + 200
to
T + 270
 • Appointment of new Board members including Indian resident Director*
 • Cessation of banking operations in existing bank accounts to mitigate risk of financial 
misappropriation 
 • Undertaking compliances under secretarial law and IBC, towards commencement of 
voluntary liquidation
T + 270 • Passing of shareholder’s resolution for commencement of voluntary liquidation and 
appointment of liquidator
183 Process Reforms: Enabling decision-making under uncertainty
T + 300 • Intimating about commencement of voluntary liquidation and appointment of 
liquidator to Income tax, RoC, IBBI, GST authorities and PF department. 
 • Public announcement in newspapers inviting claims
 • Opening a designated bank account for cash and liquid funds
 • Closure of existing bank account(s) and transfer of funds to designated bank account
T + 315 • Preparation and submission of preliminary report to shareholders of Corporate Debtor 
T + 315
to
T + 1350
Income tax
3
 • Completion of on-going and new assessment proceedings, appellate litigation and 
submission of responses to various notices, simultaneously.
 • Furnishing a bank guarantee from principal shareholder of the Corporate Debtor with 
income tax authorities to obtain tax NOC.
Provident Fund (PF)
4
 • Filing for closure of EPF account of establishment with regional PF authorities 
GST registration
 • Periodic statutory compliances (payment of tax under reverse charge and returns 
filing)
 • Surrendering GST registration towards completion of voluntary liquidation process
Foreign exchange laws*
 • Reporting under Foreign exchange laws to be verified at the time of discussions with 
Authorized dealers bank, for requisite documents to process final remittance to the 
shareholders.
Communication from ex-employees and Claims from operational credits
 • Frequent requests from ex-employees reg PF portal of the company
 • Claims from operational creditors post 30-day claim period from liquidation 
commencement date
Security deposit from government bodies
 • Refund of security amount deposited by Corporate Debtor at the time of registration/ 
obtain licenses with government bodies
T + 1350
to
T + 1360
 • Final remittance to shareholders and deposit of applicable withholding taxes thereon 
Completion of voluntary liquidation process
 • Closure of designated bank account
T + 1360
to
T + 1370
 • Submission of final report to shareholders, RoC, IBBI and NCLT (along with 
dissolution petition)
 • Filing of application with dissolution of Corporate Debtors with NCLT
T + 1430 • Scheduled date of first hearing of NCLT
 • NCLT’s order seeking reports/ reply from income tax department, RoC and IBBI
3
Bank guarantee from principal shareholder of Corporate Debtor was furnished with income tax authorities and tax 
NOC was obtained after ~ 1000 days from filing of intimation.
4
Inspection proceedings by PF authorities concluded in ~ 370 days and subsequently, inquiry in relation to payment 
of interest and damages on payment of PF shortfall was initiated, concluded in another ~ 300 days.