Small business owners in India are struggling to run their businesses due to many barriers and hurdles. Entrepreneurs are frustrated and are not willing to start or grow their small businesses.
Reporting, licensing and compliance on various things like yearly audit of income tax, service tax, VAT, TDS, reverse charge mechanism and many more is becoming burdensome for many small businesses. Not to mention by ESI, PF, professional tax, shops and establishment or factories renewal, trade licence, etc.
In big businesses, the work is distributed among directors, managers, supervisors and staff. Whereas in a small business, the owner has to take care of everything – delivering on day-to-day projects, sales, marketing, staff welfare, dealing with vendors, taking care of financial situation, etc.
Small business owners need systems streamlined to make it feasible for them to run their business, not run around government offices to get licences, no objection certificates, etc., and not to forget dealing with the section of government employees seeking bribes. Bureaucracy in India is taking away the valuable time, money, energy and peace of mind of small business owners. This is hindering entrepreneurs from starting a business, and most definitely discouraging them to run honest a business.
Not defining the policies correctly
Our bureaucrats are not defining the policies for small businesses properly. Pragmatic approach is needed. The cost, effort and feasibility of compliance to various rules, regulations, processes and returns is not evaluated properly. When any law is drafted, they do not see the effort that takes for small business to be compliant. In order to follow the law, law should be follow-able. Defining the process needs compassion and empathy.
Policy vagueness/over legislation scares honest professional businesses who slow down or stop growing. Their will power will get drained and eventually they will give up. Remember, not lending proactive support leads to hindrance to a business.
Farmers while cropping are very clear on what to do and how to get maximum yield. They know that doing right thing at the right time is important. When farmers (mostly illiterate) are able to do this kind of thinking; why our educated bureaucrats are not able to define policies properly for SMEs and help them focus on growing their business. Higher revenue means more taxes for the government.
Anti-business attitude of officials (politicians and bureaucrats)
Politicians and bureaucrats, even if they are honest, don’t want to encourage any small business because of their own ideologies and stereotypes. Anti-business ideology of some bureaucrats creates unnecessary hurdles for SMEs. The belief that businesses are crooked is based on stereotyping rather than on facts. In 1976, the preamble even changed to include socialism (government controlled business which are usually big), this has lead to the government to be filled with overzealous socialists (it could be argued that the leader of the freedom movement).
For corrupt bureaucrats, lobbying for even one big business will get them big financial benefits. They can’t get the same with small businesses because the incentive is small and they can’t deal with thousands of small businesses to make the same financial package that they get from a single big business. For them dealing with SMEs is too much work and every interaction comes with risk of getting caught for corruption. As a result such bureaucrats are not very interested in defining new policies or systems. Even if some bureaucrats are like this, there lack of engagement with new policies leads to a raw deal for SME’s.
Government not doing enough for small businesses
The government is not able to address the key issues of small businesses. Through the bureaucratic red tapes and hurdles, the government is stopping growth in the private sector. There is no real support by the government for the small businesses to prosper. As a result, India is getting deprived of the benefits accruing from a thriving SME segment.
If the skill required to drive a motor cycle is as difficult as driving a helicopter, not even 1% of motorcycle sales will happen. Similarly, if the licence rules and procedures are too many then the small business owner cannot focus on ensuring the survival of the business by taking care of customers.
After all who wants to run a business without profits and too much of headaches? There should be work life balance. Small business is not meant to be martyrs. Only if surplus is there and if rules are streamlined properly, many professionals will show interest in setting up professional businesses and growing them. This is why you do not find enough professional small businesses in India.
No wonder that there are only 38,100 people in a country of 120 crores who report income greater than 1 crore.