Hyderabad: At a time when Indian economy is facing the headwinds for its economic growth and needs investments to spur it, there is a good news that came as a respite. India’s ranking improved by 14 places and touched 63rd rank, in the World Bank’s Ease of Doing Business (EoDB) 2020 survey.
In fact it is in the list of top ten countries that has been recording improvement in its ranking consecutively for three years. In 2018, India improved its ranking by moving up 23 places to reach 77th rank. This is far better than the ranking of 142 in the final year of the UPA government.
In the backdrop of India’s consistent rise on the front of EoDB’s ranking, this article attempts to throw light upon the aspects that pushed India upward in the rank ladder and also identify the aspects that holds it back and suggests the way ahead.
The push and pull factors:
EoDB index ranks the countries on 10 parameters that the World Bank believes reflect the ease with which new firms in a particular country can operate. India has been improving its EoDB ranking on a continuous basis, which could potentially attract the attention of global investors.
Various aspects like implementation of the Insolvency and Bankruptcy Code (IBC), dealing with construction permits, the reforms in trade procedures as a result of India signing the Trade Facilitation Agreement at the World Trade Organisation, the abatement of paperwork in favour of electronic filing of documents and single-window customs procedures helped India to climb up the ladder of the rankings and reach the present stage. While it is commendable, there are still some areas with a scope for improvement, which need to be focused by the policy elite. Addressing the issues related to these parameters would go a long way in bringing in better rankings for the country.
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India still lags behind in parameters like, “Enforcing contracts”, “Starting a business ‘and “Registering property”. In order to improve on these parameters, it is pertinent to see the case of Kazakhstan, a tiny Central Asian country, which is in the top 30 of EoDB index. This country reduced the time it takes to start a business by reducing the time required for value added tax registration, thereby significantly bringing down the time to set up a new business.
On the other hand, enforcement of contracts was made easier by making judgments rendered at all levels in commercial cases publicly available. It also published the performance measurement reports on local commercial courts.
Challenges and the way ahead:
While the experiences of the top ranking countries offer useful insights into improving the EoDB rankings, it is important to take into account the federal political structure, widely diversified demographic and cultural factors of India that poses a major challenge. For instance ‘starting new business ‘and ‘registrations’ are largely controlled by respective states and any changes in these aspects depend upon the political and ideological inclination of those state’s political leadership, as well as its electorate.
For instance, bringing in Gujarat and Kerala to a strike a common chord on a decision related to ‘setting up of businesses is a herculean task, given the approach and orientation of these states towards business. Here comes the need for a cooperative federalism, where Centre identifies the states needs and the states understand the Centre’s prerogative, keeping the larger interests of the country in view.
In this context it is also pertinent to remember that a mere better rankings of the EoDB is not sufficient for attracting investments. Hand in hand, endeavours need to be put in place, to address the issues like bridging infrastructural bottle necks, improving quality of the human capital, ensuring the supply of sustainable energy resources to meet the demands of the industry without causing much harm to the environment, bringing in land and labour law reforms, filling up information asymmetries. These efforts could create a more business friendly regulatory environment and the benefits of these rankings could be translated into concrete results on the ground, which in turn boosts output and employment.
(Written by Dr. Mahendra Babu Kuruva, Assistant Professor, H.N.B.Garhwal Central University, Uttarakhand)
