Turn red lights green: Aadhaar and Digilocker for enterprises will accelerate job creation

Our unique Digital Public Infrastructure (DPI), from Aadhaar, UPI, Digilocker, Digiyatra and Co-Win to Fastag and much else, has enabled millions of citizen transactions through an appropriate balance of public standards and private innovation. 

However, so far, hundreds of thousands of employers have been left out of DPI. Fantastic recent policy announcements that green-light a unique identifier and digital repository for employers will enable a new wave of innovation in ‘enterprise DPI.’ 

This will accelerate high-wage job creation. Why? 

India’s challenge is simple but hard: Mass prosperity is held back by wages rather than jobs, high wages are held back by a shortage of non-farm employers with high productivity, and this employer population is held back by regulatory cholesterol: compliances/filings/jail provisions (over 85,000), irrational workflows (too many people and departments involved) and interpretation subjectivity (‘Show me the person, I’ll show you the rule’). 

This toxic brew breeds corruption, uncertainty and informality. 

Also Read: Manu Joseph: India has become too rich to let petty clerks torment people

Mass prosperity is a national security, justice and constitutional objective; that path includes digitizing, rationalizing and decriminalizing our regulatory cholesterol.

The current absence of a unified verifiable employer identity sabotages a paperless, presence-less and cashless compliance ecosystem. 

Entrepreneurs grapple with over 23 distinct identities issued by various governments and their agencies, The EPFO, ESIC, PAN, GSTN, CIN, TAN, LIN, Professional Tax, Factory and Shops, and establishment licences all have identifiers. 

Each has its life-cycle and often requires periodic action for payments, renewals, etc. 

The inability to extract compliance data across diverse and distributed data sources also hinders the government’s ability to sniff defaults, delays and frauds for effective enforcement. 

The proposed PAN 2.0 will serve as a unique enterprise identifier; it should instantly be adopted by the Central government, with state governments getting a time-bound glide path.

Also Read: PAN 2.0 sounds good but will it end fraud through impersonation?

PAN 2.0 will complement the announced Entity DigiLocker, a secure digital repository for all government-issued licences, registrations and permissions. 

A single source of truth, this can revolutionize processes by minimizing paper-based filings and record-keeping. 

For instance, applications for factory permissions currently require thousands of self-attested and notarized documents spanning over 40 different government departments. 

Entity Digilocker would enable entrepreneurs to apply for approvals digitally by referencing their business identifier and granting access to their entity DigiLocker for document verification. 

A tamper-proof, authenticated and credible document repository could reduce approval times from months to days. 

A National Employer Compliance Grid (NECG) is expected to facilitate data exchange between employers and governments via an ecosystem of Regulatory Tech providers. 

This will include filing periodic returns to issuing licences, registrations, permissions, NoCs and consent orders by the authorities directly into the Digilocker.

Adopting DPI for employers takes the advice of Nobel laureate Daniel Kahneman, who suggested we instinctively step on the accelerator to go faster, but better results come from releasing the brake. 

The brakes on high-wage job creation are apparent when we shift from the bird’s eye view of the daily life of employers (say, fiscal and monetary policy) to a worm’s eye view. 

This shift would draw attention to two more vectors of regulatory cholesterol: rationalization and decriminalization. Rationalization is complicated since it now equates with civil-services reform. 

Our 25 million civil servants have shifted from a steel frame to a steel cage because of thought worlds like ‘prohibited until permitted’, ‘guilty until proven innocent’ and ‘ban cars to prevent drunk driving,’ and the bureaucracy’s tendency to be too small for big things and too big for small things. 

In 1748, Montesquieu posited that laws must exhibit consistency and called their underlying relationships the “Spirit of Laws." The spirit underlying our economic laws is characterized by distrust.

The rationalization vector is most impactful at the state-government level and offers chief ministers a non-fiscal tool to push up wages in their states.

On decriminalization, we must accept that the meagre outcomes of Jan Vishwas 1.0 (only 50 of the central government’s employer jail provisions removed) arose from asking bureaucrats to cut the tree-branch they were sitting on. 

Jan Vishwas 2.0 must reverse the gaze by removing everything that doesn’t meet five clear criteria for jail: 

Must involve physical harm to other individuals; Must involve intentional defrauding of stakeholders (employees, lenders, shareholders, government); Must involve externalities to societies so large that the violator cannot compensate, like public order, national integrity, etc.; And there should be no jail provisions in general clauses that define a crime too broadly or do not specify it; And no jail provisions related to delayed and inaccurate filings, procedural infractions, incorrect calculations and wrong formats. 

These five criteria will eliminate almost half of the Centre’s 5,000 plus jail provisions and create a template for the 20,000 plus state government jail provisions.

In 1867, reformer Bholanath Chandra wrote, “A widely diffused enterprising spirit is always the antecedent to that widely diffused national prosperity, through which alone can our nation ever hope to occupy a conspicuous position in the eyes of mankind. Such was the state of India once, and such ought to be the state of India again."

Also Read: A digital public platform for jobs could lend India’s labour market efficiency

A powerful India at 100 needs the DPI of NECG. 

It will reduce the cholesterol that disadvantages our high-productivity, high-wage employers relative to low-wage employers whose sense of humour about the rule of law is enabled by informality, corruption and compliance subjectivity. The path is clear. It should be taken without delay.

The authors are, respectively, with Teamlease Services and Teamlease Regtech.