India aims to break into Ease of Doing Business Index Top 50
Late last year, the World Bank released its annual Ease of Doing Business index, and India was delighted to note that it had secured a dramatic jump in rankings, moving up from 130th to the 100th position, out of 190 countries. After a somewhat slow start (India had moved up by just one position the previous year,) the Modi government saw this as definitive proof that structural reforms undertaken by them over the years, had contributed to this improved ranking.
Recognising that India is a very complex and large country, where change on the ground is very crucial to attract investors and international businesses in greater numbers, India worked on improving its ranking in 6 out of 10 indicators, and in distance to the frontier, it improved in 9 out of 10 indicators. Today, as things stand, India ranks in the top 30 in protecting minority investors, getting credit and getting electricity.
CEO of policy think tank, NITI Aayog, Amitabh Kant who spearheaded a number of these changes, said in an interview to the Business Standard, “Bankruptcy code, easier exit, the goods and services tax, real estate regulation authority, push for digitisation and push for no human intervention across sectors, among others, have been the big reforms undertaken that were never envisaged or performed.”
However, work is far from over, as India still needs to make progress in the enforcement of contracts (164th position), construction permits (181), registering property (154) and cross-border trade (146). Radical transformation in these 4 key sectors will be key, if India wishes to climb up the ladder next year as well.
Recently, after the exit of World Bank’s Chief Economist, Paul Romer, there has been some speculation and debate around the ‘new methodology’ used by the World Bank that may have contributed to such a significant leap in rankings. Justin Sandefur, a senior fellow at the Center for Global Development, told BloombergQuint in an interview: “We found if we try to smooth out the changes in methodology, instead of India moving from 130 to 100, it would have started closer to 119 and moved up to 114.”
However, not wanting to be alarmist, he clarified his position by saying, “Personally, I’m suspicious that any investor is going to look at this recent controversy and question their investment decisions. My guess is most investors thinking about making a serious commitment in India are going to be looking at concrete realities in their own sector, their own city or location where they are thinking of investing and not turn to World Bank’s page to decide on their investment decisions.”
Meanwhile, the Indian government has decided to keep up the momentum and work towards the ease of doing business even further, by identifying 372 action points for individual states, and using the World Bank’s rankings as a sort of carrot to spur reform. Finance Minister Arun Jaitley said that these changes would be carried out in a ‘mission mode’.
Earlier, he had expressed hopes that India would continue to forge ahead and jump to the top 50 very quickly.
One of the methods India will use to achieve this continued progress will be to encourage a healthy sense of competition amongst its states and evaluate the performance of states based on feedback from the industry. For instance, south Indian states, Andhra Pradesh and Telangana who jointly topped the rankings last year compete with Haryana and eastern states like Odisha and West Bengal, who make up the top 5. Constructive moves to maintain pole position or better other states will improve the business climate for investors in the country overall.
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Preeti Prakash | Journalist