This government needs to be complimented for a significant improvement, over the last two years, in the World Bank’s ‘Ease of Doing Business’ ranking. India’s ranking, which was a dismal 142 out of 189 countries in 2015, has shot up to 77 now. In two criteria, there has been significant improvement. In ‘Trading Across Borders’ India’s rank has improved to 80 from 146 last year, and in ‘Dealing with Construction Permits’ to 52 from 181.

Yet, like Robert Frost said, we have miles to go before we sleep.

India’s worst two rankings are ‘Registering Property’ and ‘Enforcing Contracts’. It must concentrate its efforts on improving these two.

The responsibility for a proper registration of property vests with the State governments. Since a lot of tax evaded money has been invested in property, it is convenient to the evaders that land/property records are fudgy and can be (as they are) doctored.

The responsibility of enforcing contracts vests with the judiciary which, for strange reasons, gives a lot of leeway to white collar criminals.

Enforcing contracts

It is of no use if India reaches Number One rank in other parameters of ease of doing business if contracts cannot be enforced. Because, after an entrepreneur makes an investment, if he cannot enforce contracts (such as, for sale), then he is locked in and, like in Hotel California, he can check out any time he likes, but he can never leave. So, unless contracts are made enforceable, and within a time frame, a higher ease of doing business ranking will not translate to higher FDI or even more FPI investment.

Unenforceability of contracts arises from various factors. Judicial delays are well known, and the leeway granted, unbecomingly, to lawyers of the white collar criminal, to delay, ad nauseum , the hearings, through unlimited adjournments, is proof of the ease of doing unpunished white collar crime.

But added to that is the ease of getting law enforcement agencies to muddle up a case. Last week a UK court dismissed charges brought by the CBI against another fugitive who absconded with proceeds of crime, simply because the case was presented poorly. This can also happen in other high profile cases such as Vijay Mallya, Nirav Modi or Mehul Choksi.

So if both the judiciary as well as the investigative agencies treat white collar criminals with kid gloves, do we need to be ecstatic about the improved ease of doing business ranking? The government needs to get both these systems in place if it is serious about attracting foreign direct, or indirect (portfolio) investment.

And there is report on rift between top two guys of CBI with West Bengal connections. It seems that a ₹25,000-crore Ponzi scam, in which some of the senior TMC people were involved, was being probed by one of the two CBI guys. This suggests that justice comes second to political pressures which is not the image to be portrayed for ease of doing business.

US mid-term polls

Last week the Democrats regained control of the House of Representatives in US mid-term elections, though the Republicans retained control over the Senate. The divided house would lead to legislative uncertainty and slowdown; laws need to be passed by both houses.

Uncertainty will also manifest itself in, first, elections to 5 States in India in November/December and second, in general elections by May 2019. Stock markets detest uncertainty.

(The writer is India Head — Finance Asia/Haymarket. The views are personal.)

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