1. Ease of doing business: Are we faring better in competition?

Ease of doing business: Are we faring better in competition?

The World Bank report on ease of doing business made little ripple as it ranked India at 130, a mere one notch lower than in the previous year and therefore a little disappointing.

By: | Published: November 1, 2016 6:37 AM

The World Bank report on ease of doing business made little ripple as it ranked India at 130, a mere one notch lower than in the previous year and therefore a little disappointing. But then it has to be appreciated that reforms or dismantling of the barriers to efficiency and productivity have to face intense opposition from the vested interest groups especially in a Parliament Democracy like ours and therefore take time to implement. The report is a testimony to the ease with which business is conducted by an individual entrepreneur and hence may not capture fully the circumstances engulfing the hitherto predominantly public sector dominated sectors. It may miss the big socially relevant concept of conducting business by the public sector and it must not be forgotten that issues of competitiveness and efficiency of operations for them are thrust areas of only recent origin.

Doing Business is not a comprehensive measure of all aspects of conducting business and excludes critical factors like economic strength, financial growth, market size, taxes, tariffs and subsidies, level of corruption etc. in measuring the ease with which business is conducted and in a way, penalises or fails to give credit to those economies that display positive characteristics on all these aspects and surely, India is one of them. Imagine, the economic growth measured by GDP, trade balance, inflation rate, foreign exchange reserve, fiscal deficit, the basic factors that determine the progress, resilience and sustainability of a reasonably strong economy do not figure in the capability matrices of doing business. It is rightly acknowledged in the report that although these crucial indicators have been excluded, the ranking parameters (11 of them) are seemingly influenced by these basic features of the economy and in their absence the ranks achieved by an individual economy in the final analysis would have been much lower. In a way, the effectiveness of these ranking parameters actually flows from the basic strength of the economy as reflected in the basic indicators.

The aspect of easy operations by the private enterprises in India is indeed a critical consideration for enhancing the flows of FDI and FII that the country is eagerly looking forward to supplement the capital infusion in various sectors. One of the reasons why India is looked down upon as an attractive destination for investment by the foreign entrepreneurs is India’s recent abilities to unshackle the traditional hold of archaic rules and procedures, increasing the limits of FDI in defence, retail, real estates, simplifying the contractual obligations especially in PPP mode of project implementation and introducing reforms in commercial matters. A specific reference has been made in the report on the recent amendments made in the Company Act which has facilitated the actual business operations and simplified the extant company rules. These would be further improved in the coming months including the Insolvency and

Bankruptcy Codes.

During FY16 the areas where India has been complemented concern electricity connectivity by improvements in process efficiency, payment of taxes by introducing electronic systems, trading across borders by electronic submission and processing of documents for imports and exports, enforcement of contracts by expanding dedicated venues to resolve commercial disputes. Apart from these areas, India scores high in property registration within 7 days, getting credits, protecting minority investors. The weaknesses in enforcing contracts, dealing with construction permits and starting a business are found to be quite deep rooted.

The government is quite firm in implementing GST uniformly from April’17 after achieving a political consensus. A number of other reforms involving real estate, energy, labour, environment, land acquisition, mineral exploration and mine allocation, rural development sectors and PPP mode of project management are in the final stages of implementation. All these would result in unleashing the full growth potential of these sectors and would facilitate investment flow of corporates and private entrepreneurs.

In world Competitiveness report, India has improved its ranking from 71 (out of 140 countries) in the previous year to 55 in FY16. In ease of doing business report the ranking of India at 130 out of 190 countries brings about the fact that competitiveness does not necessarily improve parameters in doing business. It is hard to believe, unless the identified parameters are found to be entirely different.

The author is DG, Institute of Steel Growth and Development. Views expressed are personal.

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