Manish K. Pandey | The Dollar Business

Since the Modi-led government took over in May 2014, we have seen a push on two initiatives: ‘Make in India’ and ‘Ease of Doing Business’. While the former has started gathering pace (manufacturing sector growth in India hit a 22-month high in October 2016), 

the latter, ironically, is yet to show results. Despite a spate of reforms over the past two and a half years, India remains one of the toughest place on earth to do business. Well, that’s what the World Bank’s latest “Doing Business” report states!

In 2017 report, released by the World Bank on October 25, 2016, India has moved up only one place from last year, ranking at 130 out of 190 countries. The report, which ranks a country on 11 parameters (such as starting a business, getting electricity, registering property, getting credit, paying taxes, etc.), doesn’t seem to recognise the efforts put in by the Indian government to create a business-friendly environment in the country (if it has at all, it’s not reflected in the rankings).

In fact, the country’s ranking in several areas fell this year – India slipped to 155th from 151st on the ease of starting a business, stumbled to 185th from 184th when it comes to dealing with construction permits, and toppled from 10th to 13th on protecting minority investors. The only significant gain over the last year has been on the ease of getting an electricity connection (India moved up from 178th rank to 172nd rank). So, what is stopping India from climbing Ease of Doing Business Ranking, when the world seems to be appreciating Prime Minister Narendra Modi’s efforts to make India a business-friendly place?

No doubt, over the last couple of years, the government has introduced several measures like single-window clearance system for facilitating trade and improving ease of doing business in the country. But then it’s time the government also streamlines infrastructure and institutions facilitating trade. Addressing land acquisition issues and labour market rigidities will also help improve India’s business environment further.

Several critics also believe that for India’s business environment to improve substantially, policymakers will need to move away from slow piecemeal reforms. “The reform process has been slow, so it will likely take some time before India becomes as competitive as its OECD peers,” states a report from Moody’s Analytics. And not to say, deficiencies remain across various supply-chain links. Hence, starting a new business in India still takes time.

Well, despite these concerns, I believe India’s ease of doing business ranking is bound to improve over the coming years. For, many reforms have been initiated only recently and will take time to seep in through the system. For instance, a new bankruptcy law was signed in May 2016 and hasn’t come entirely into effect. And then there is the much-touted Goods and Services Tax (GST). The new tax regime is expected to ease India’s cumbersome tax system, help goods move seamlessly across state borders, curb tax evasion, improve compliance, and of course enhance ease of doing business in India. These measures will certainly push up India’s ranking in 2018 and onwards.

And when can we see India capturing the No.1 spot in “Doing Business” rankings? For that to happen PM Modi will have to make another 1,742 trips to foreign lands! Confused? Didn’t it take him 54 foreign visits (till date) to improve India’s rank from 134th (in 2015) to 130th (in 2017) in Ease of Doing Business Index? Well, that’s one way you can look at it, if you want! And I only hope that’s not what the World Bank considered while arriving at
India’s rank in the Ease of Doing Business Index!