Not business-friendly yet

For the NDA government at the Centre and in most State capitals including Dispur, ‘Ease of Doing Business’ has been an oft-repeated mantra in the past year. The World Bank had given India a lowly ranking of 130 (later revised to 131) in 2015. This prompted Prime Minister rendra Modi to set a target that by 2017, India should break into the top 50 bracket. Such progress would make easier India’s continuing efforts to attract foreign capital, so argued the Modi government as it sought to speed up reforms and slash red tape. Taking a cue from the Centre, the BJP-led government in Assam too got a legislation passed last June to fast track proposals to set up businesses under a single window system. But despite all these efforts, India’s ranking in the World Bank’s latest ‘Doing Business’ report remains almost unchanged at 130. The country’s immediate neighbors Chi, Nepal, Bhutan and Sri Lanka are all ranked higher, while Pakistan, though ranked 144th, has been med among the top 10 improving tions. Expectedly, there are red faces in New Delhi with Union Commerce Minister Nirmala Sitharaman terming the report ‘disappointing’. The Central government is arguing that the World Bank’s ranking methodology did not factor in all of its recent efforts to sweep away arcane rules and simplify procedures. The Prime Minister has asked top bureaucrats to study the report and identify areas where further improvements can be made, asking them to file reports within a month. Clearly, this is not a setback he can take lightly; detractors are even saying that the setback dents his image as a go-getting administrator who raised the country’s expectations in 2014 with his vaunted ‘Gujarat model’ of growth.    

However, the latest rankings topped by the likes of New Zealand, Singapore, Denmark, Hong Kong and South Korea — show that while India did undertake some important reform measures, it has remained comparatively on the same rung because other countries too have been striving hard to improve. The report lauds India for speeding up power connections for new businesses (down from 4 months to 45 days), setting up an electronic system for companies to pay employee insurance contributions (ESIC), easier tax payment, simplified export-import procedures, and new mechanisms for enforcing contracts. India has also drawn kudos for overhauling the Companies Act to bring its companies in line with global accountability and corporate governce practices, while protecting minority investors’ rights. On the flip side, India’s labour laws have been flagged ‘for creating economic distortions’. The Central government is now reportedly pinning hopes that ectment of the Insolvency and Bankruptcy Code by December this year, countrywide implementation of Goods and Services Tax (GST) from April next year, as well as several initiatives being planned like single window for registering companies, revamping rules for property registration, raising of foreign-investment limits, digitizing records and better infrastructure — will all help to bring forth a much improved ‘ease of doing business’ ranking. However, it should be remembered that India’s ranking in the WB report is based on studies conducted in Delhi and Mumbai by the Intertiol Fince Corporation (IFC). Other studies ranking states last year showed that along with frontrunners like Gujarat and Andhra Pradesh, states like Jharkhand, Chhattisgarh and Madhya Pradesh too did quite well on the business reforms front. This offers hope for a state like Assam, provided its government is really sincere in dismantling the license-permit raj, improving law and order, speeding up infrastructure projects, and building up a business-friendly environment. With a stronger position at the Rajya Sabha, the Modi government may well go all out on reforms at the Centre next year — but it will reap better dividends overall if it encourages and pushes the States to do their bit to make the country a far better place to start a business or set up an industry.