The Centre’s understandably excited about the leap in rankings achieved by India in the World Bank’s ‘ease of doing business’ index. To jump 30 rungs in a year and feature among the top ten countries to have improved their rankings is a commendable achievement indeed. To be sure, this is a result of all the efforts put in over the last three years after Prime Minister Narendra Modi set a target for India to break into the top 50 countries for ‘ease of doing business’ . The four parameters where there has been a quantum jump in rankings —resolving insolvency, paying taxes, access to credit and protecting minority investors — have all seen focussed efforts from the Centre both in terms of policymaking and in implementation. The rise in the insolvency ranking is directly attributable to the enactment of the Insolvency and Bankruptcy Code, just as the superior access to credit has been facilitated by the licensing of new entities such as small finance banks and payments bank, not to forget the MUDRA scheme.
The journey, however, has just begun and there is a long way to go yet before India can break into the top 50. As anyone who has tried to start a business would tell you, the process of securing approvals, permits and regulatory nods can put off the most persistent of businessmen. It’s not surprising that the country ranks 156 — down by a rank from last year — in the matter of ‘starting a business’. Again, in the matter of securing construction permits, India’s rank of 181 is almost at the bottom — the survey ranks 190 countries. Ditto with several other crucial parameters such as enforcing contracts and registering property. Clearly, the more difficult reforms lie ahead with the low hanging fruit, mainly those within the ambit of the Centre, already plucked. The process of improvement has to be continuous and there can be no let up.
The World Bank has based its assessment on surveys in Delhi and Mumbai only. The survey, by design, picks one city in a country to form an overall assessment, but given India’s size it has picked two. Yet it has to be pointed out that this is not a representative sample given the complexity of India. The national rank of 100 may not reflect the state of affairs for ‘ease of doing business’ in, for instance, a Chennai, a Kolkata or a Bengaluru. Some of the biggest hurdles that businesses face such as in registering property or securing construction permits fall under the realm of States and the Centre can do little more than give them a nudge. While the Centre’s ranking of States on ease of doing business has exerted some pressure, what’s encouraging is that States seem to have woken up to the need for reforms as they compete for investment. When Communist-ruled Kerala promulgates an ordinance amending several State laws to promote investments and ease of doing business, you know that the era of competitive federalism has arrived.