R Srinivasan

Just cracking the exam isn’t enough

R Srinivasan | Updated on June 09, 2021

Litmus test How easy MSMEs will find doing business will be crucial   -  Bijoy Ghosh

How meaningful is India’s meteoric rise through the ease of doing business rankings?

If the Indian government was a student giving the Class 12 exams, it would be one of the increasing number of ‘toppers’ who are managing to score a perfect 100 per cent in all subjects — at least as far as the ease of doing business rankings is concerned.

In the much touted — and followed — rankings brought out by the World Bank, India has, after Prime Minister Narendra Modi made going up the rankings a key focus area for his government, been simply rocketing up the rankings.

From a rank of 142 in 2015 (the first rankings after Narendra Modi assumed office), India, pandemic notwithstanding, had shot up an astonishing 79 ranks to 63 by 2020. But the Prime Minister isn’t content — he wants India to be within the top 10 or 15 within the next few years, going toe-to-toe with topper nations like Singapore and Scandinavian countries.

All this would indicate that there has been a remarkable turnaround in the business environment in India, and that the “elephant” has finally manage to shake off its baggage of sloth, red tape, corruption and inefficiency and begun to chase the dragon in serious earnest.

That would be like saying that the children who manage to get perfect — or near-perfect — scores are geniuses who will soon be conquering the world. The reality, as we know, from the staggering ₹75,000 crore size of the private coaching market in India, as well as the post-selection struggles of those who crack the toughest entrance exams in the world like IIT JEE or CAT, is different. What many of these kids — with the help of a large, organised training industry — have actually cracked is not the subject itself, but the art of taking exams.

That is why, despite the widespread cheer when the government finally cancelled the Class 12 Boards, there were not a few cries of dismay, from those who had genuinely prepared for the exams, as well as those who had invested heavily to be trained in maxing the tests. ‘Internal assessments’ could take away the hard won edge these kids would have enjoyed if they had actually to take exams which they had been drilled to perfection in.

The same is true of the government. India’s meteoric rise through the EDB rankings is, undoubtedly, the reflection of some serious reform efforts over the past few years in particular. In 2020, India along with other top improvers implemented a total of 59 regulatory reforms in 2018/19 — accounting for one-fifth of all the reforms recorded worldwide, according to the 2020 report.

World Bank’s praise

According to Junaid Ahmad, World Bank Country Director in India, “India’s impressive progression in the Doing Business rankings over the past few years is a tremendous achievement, especially for an economy that is as large and complex as India’s. Special focus given by the top leadership of the country, and the persistent efforts made to drive the business reforms agenda, not only at the central level but also at the state level, helped India make significant improvements.”

The report goes on to list some of these measures: The establishment of a modern insolvency regime in 2016 as part of a comprehensive strategy to reform corporate law. Completing the procedures required to build a warehouse now costs only 4 per cent of the warehouse value. Building quality control measures were also improved, and now only six economies in the world score better than India’s 14.5 out of 15 on this index, according to a World Bank release.

India made starting a business easier by abolishing filing fees for the SPICe company incorporation form, electronic memorandum of association, and articles of association. Dealing with construction permits was streamlined, the time and cost of obtaining construction permits reduced and building quality control improved by strengthening professional certification requirements.

India made trading across borders easier by enabling post clearance audits, integrating trade stakeholders in a single electronic platform, upgrading port infrastructures, and enhancing the electronic submission of documents. India made resolving insolvency easier by promoting reorganisation proceedings in practice.

On the “distance to frontier metric,” one of the key indicators in the survey, India’s score went from 67.23 in Doing Business 2019 to 71 in Doing Business 2020. This means last year India improved its business regulations in absolute terms — indicating that the country is continuing its steady shift towards best practice in business regulation.

The ground reality

But what is the reality on the ground. A recent survey by the Bombay Chamber of Commerce and Industry, which surveyed 104 member micro, small and medium industries on how they experienced ease of doing business on the ground as an MSME business, and what could be done to make that better, is telling — not in the wording of the report, which is couched in the usual effusive praise for the government, but in the asks.

And what are the asks? They want all modified Acts and Rules to be made available in an online repository where the original Acts and Rules are available along with the State-level amendments “in a chronological manner, duly enabled by adequate keywords for searching and retrieval.” In other words, take away the Babu’s power of knowledge — of being the only person who knows what the rule is.

Another ask is that third parties, involved in assisting an industry to obtain approvals from various government departments could be formalised and regulated through adequate legislations so as to ensure uniformity in service delivery and fee structures — in other words, control the middle men if you can’t eliminate them.

Other “suggestions” include things like “digitization and automation of Government to Business services, with no physical touchpoint with the departments — in other words, no “meetings” to do what they are supposed to do. The largely MSME respondents also said they would like “local-level facilitation support for the investors along with clearly defined escalation mechanism for raising grievances.”

This means that while the reforms have taken place on paper, the practice of governance and administration hasn’t changed much. We have cracked the exams alright, but we haven’t yet understood the subject. If the rise in rankings is to be accompanied by a rise in investment flows — particularly in manufacturing — then reforms will have to move from paper to ground.

The writer is former Editor, BusinessLine

Published on June 09, 2021

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