The Big Picture – Ease of Doing Business: What has changed?
In the recently released Ease of Doing business report, India has climbed 12 spots to 130 among 189 countries. The ranking was boosted by three of the 10 parameters, namely ease of starting a business, ease of getting electricity, and dealing with construction permits. Union finance minister has said that there is optimism that India will get into the top 100 next year, and it is possible with the slew of measures the government has taken since June. Since the new government took over, there have been a lot of reforms in taxation, setting up consumer courts, fixing anomalies in the Companies Act, etc.
In some parameters the performance of India is poor. These are: starting a business, dealing with construction permits, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. With India’s ranking being 183, construction permits remain another area that needs to be addressed. Procedural reforms have been neglected for too long.
Compared to china, India has still long way to go. Among South Asian economies, India made the biggest improvement in business regulation. India ranks in the top 10 in Protecting Minority Investors. However, it is well-known that the real hurdle in India for doing business is the maze of red tape, which is seen to be a legacy of the license-permit raj. Domestic entrepreneurs as much as foreign investors need relief from the vice-like grip of bureaucrats and bureaucratic structures.
The main problem with this World Bank released survey is that it considered only Mumbai and Delhi. Rajasthan, Gujarat, Punjab, etc., which have undertaken a lot of reforms towards making it easier to do business, are not in its purview. Another issue that does not figure in the report is the need for an ecosystem that spurs innovation and research. Long-term investors would prefer a place where the workforce is skilled and healthy and where the government delivers on civic amenities, social and physical infrastructure, and law and order.
For an investor-friendly business environment, what’s required is greater transparency, including in political and electoral funding, which will replace systemic corruption with easier-to-tackle opportunistic corruption. It is also important to focus on challenges that entrepreneurs face at home because long-term economic growth can only take place if driven by domestic start-ups.