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Giant leap in ease of doing business

D M DESHPANDE

The ease of doing business report has been released by the World Bank. It has some good news for the Indian economy after a while. India has pole vaulted 23 places to reach 77th place in the ease of doing business index. In two years (2016-18), the nation has jumped 53 places which indeed is a commendable feat considering the odds it is facing. It also gives a shot in the arm for a poll bound Government.

The World Bank’s report couldn’t have come at a more opportune time if one takes in to account both economic and political factors. Of late, stock markets, due to a variety of reasons, have turned volatile. Foreign portfolio investors have turned net sellers in markets.  Investment in productive capacity has stagnated and remained so for quite some time. Of the ten parameters based on which the survey is carried out, India has made positive gains in six of them. Significant improvements have been recorded in ‘trade across borders’ ‘dealing with construction permits’ and ‘getting electricity’. Hopefully, therefore, investment sentiments and trend will change for better because of positive findings of this report.

The World Bank annual survey covers a total of 190 countries. Just four more countries have fared better than India-Afghanistan, Djibouti, China and Azerbaijan. What it means is that India has won on the basis of its own absolute performance and not on the basis of underperformance of other countries; there have been such criticisms in the past.

The Finance Minister is reported to have said that we have decoded the secret to move up the ladder in ranking, in quick time. There is no doubt that implementation of GST and Insolvency bill have helped a lot in bringing about this desired result. However, one criticism that is made invariably every year is that the survey covers just two cities, Delhi and Mumbai. And the two biggest metros do not tell the whole story of how it’s like doing business in the whole or other parts of India.

As if to counter this argument, a recent  domestic survey conducted regionally places Ludhiana, Hyderabad and Bhubaneswar in top 3 positions in national ranking much ahead of both Delhi and Mumbai. This is a certain indicator of reforms percolating deeper and finer in the economy. The newer and smaller states are giving a tough competition to larger and well entrenched states. Similarly, tier 2 and tier 3 cities are giving a run for their money to the established metros in several spheres. This is a good sign for the quicker, inclusive and sustainable socio-economic development of the economy.

In the category of number of days in starting a business, India has moved up from 29.8 days to 16.5 days from mid 2017 to mid 2018. Similarly, there is a significant improvement in obtaining construction permits; this has dropped from 143.8 to 93.8 days. The time taken and the amount of paper work for facilitating trade have seen a remarkable improvement. In respect of exports, it has been reduced to 66 hours from the earlier 106 hours; in imports it is even better from 264 hours to 96 hours. In all these, there is a definite potential to improve further in a short time period with a focused policy plan and action.

Surprisingly, we are not doing well in paying taxes. This is the first report of doing business after implementation of GST. Perhaps, the initial glitches have held back this key reform outcome for some time. With bankruptcy code also in place, if properly implemented, both of these together could take India few notches higher in the pecking order.

The rankings do not take in to account qualitative factors. A supportive environment for business cannot be seen in isolation; it must be seen holistically along with indicators such health, hygiene and education. Independence, integrity and performance of key democratic institutions is also a key factor. That the CBI-the central and reputed investigating agency-and RBI-which as central bank has earned global respect-are publicly seen to be at loggerheads with the government.

Unfortunately, this has coincided with the release of the report. The fringe elements, from time to time, have come to the center and dictated terms to the government and even to the judiciary. The picture of outsiders forced to flee from Gujarat does not augur well for that state nor for the industrial well being of the nation. Even the perception that a section of the population and business lives in fear, is not a comfortable feeling for the Government.

So, while a liberal regulatory environment for business is needed, attention also needs to be paid to some of the qualitative aspects. Having said that, rankings such as the one by World Bank hold a lot of importance since we still have highly bureaucratized form of government.

 

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