Easier said than done

| Updated on November 02, 2018 Published on November 01, 2018

India moves up several notches in ease of doing business, but grey areas remain

It is no mean feat that India has moved up 53 ranks in two years (from 2016 to 2018) in the World Bank’s Ease of Doing Business Index, its ranking now at 77. More remarkably, it stands out among the top five reformers among 190 countries, its score up by 6.63 points to 67.23; the four countries whose score has jumped more are Afghanistan, Djibouti, China and Azerbaijan. This implies that an improvement in rank is based on India’s absolute performance, and not on the under-performance of other countries. The survey, which is however restricted to Mumbai and Delhi, maps reforms across 10 parameters, of which India has done well in six — starting a business, dealing with construction permits, getting electricity, getting credit, lowering taxes and trading across borders. The number of days taken to start a business has dropped from 29.8 to 16.5 between mid-2017 and mid-2018. Likewise, the number of days taken to obtain construction permits has dropped from 143.8 to 94.8; border compliance for exports from 106.1 hours to 66.2 hours and imports from 264.5 hours to 96.7 hours. There has been a setback in time taken to register property and pay taxes. Since this is the first Doing Business report to capture the GST impact, the latter comes as a surprise; it suggests that glitches in GST need to be ironed out. But as the Finance Minister said, India seems to have ‘cracked the code’ in moving up the rankings ladder. There can be no denying that both GST and the Insolvency and Bankruptcy Code, if properly implemented, will go a long way in enhancing the business climate.

However, the index does not take qualitative factors into consideration. The notion of a supportive business environment cannot be seen in isolation of a country’s health and education indices, its political climate and the robustness of key institutions. Oddly enough, India’s improved ranking coincides with an extraordinary outbreak of discord within India’s premier investigative agency CBI, and between the Centre and the Reserve Bank. Fringe elements in the political spectrum have disrupted business activity in Gujarat and elsewhere, upsetting free movement of labour. A government that promised ‘minimum government and maximum governance’ seems to evoke fear among sections of industry. A liberal regulatory environment must be accompanied by transparency and consensus in policymaking. An index that takes social and physical infrastructure as well as grievance redressal systems for all stakeholders into account would be more insightful.

The index has evoked criticism in the past, notably by this year’s Nobel prize winner Paul Romer who suggested that its methodology was biased. Critics have argued that the report does not take a nuanced view of regulation. While clunky regulation holds up day-to-day operations of a business, some rules are needed to protect public goods as well as vulnerable groups. However, for a bureaucratised nation such as ours, the Ease of Doing Business index provides significant benchmarks.

Published on November 01, 2018
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