The World Bank recently released the 15th Edition of its flagship “Doing Business” Report. The report was titled “Reforming to Create Jobs”, a relevant title for India where a large young population entering the workforce every month is looking for “good jobs”. The report ranked India 100th among 190 countries, with the rank jumping from 130s in the last three years. India’s absolute score, termed as the Distance to Frontier (DTF) score, improved from 56.05 (2017-18 methodology) last year to 60.76 this year.
What has happened?
There is a lot of positive news regarding India’s performance this year. The report identifies India as one of the 10 (ranking #5 in terms of actual change in DTF score) economies that improved the most over last year. India was the only economy from South Asia joining the top-10 improvers’ list. Further, even within these 10 economies, India implemented the highest number (8) of reforms in 2016-17. Out of the 10 areas covered by the report, India made it easier to conduct business in eight of them.
The improvement this year symbolises the government’s resolve on removing regulatory bottlenecks affecting businesses. Some of the key reforms mentioned in the report are adoption of a new insolvency and bankruptcy code, an online system streamlining obtaining of construction permits, easier enforcement of contracts through the National Judicial Data Grid and easier payment of taxes by implementing electronics payment along with administrative measures easing compliance with corporate tax.
The biggest improvements were seen in the areas of resolving insolvency, getting credit and paying taxes. The report also highlighted areas needing improvement. We still rank 164th in enforcing contracts, 156th for starting a business and 154th for registering property—the DTF score improved only marginally under these heads.
Why is it important?
The ease with which an individual can start and operate her business is a key parameter that affects all, from MNCs to a first-time entrepreneur, who are looking to conduct business in a country. The report uses Delhi and Mumbai as proxies for quantifying the ease of doing business in India. Some might argue that the two cities are not representative of a diverse economy like India. However, since the report uses similar proxies for other countries (for e.g. Auckland for New Zealand, Dhaka and Chittagong for Bangladesh and so on), its benchmarking across 190 economies is widely accepted by global audiences in the policy, investment and research space. It highlights the improvements, challenges and good practices across key business parameters. Positive investor sentiment fuelled by India’s showing in the World Bank rankings is understood to have contributed to a 387-point rise for the Sensex the very next day of the announcement.
How did we get here?
“Hitting a century”, as it is being popularly called, required considerable hard work and coordination among various government departments, ministries and states. The government has attributed the highest priority to improving the ease of doing business in the country. In December 2016, a meeting of top government officials, chaired by the Union finance minister, took a number of decisions that addressed many aspects that help improve India’s Doing Business ranking. As of May 2017 (before the June 2017 deadline for implementing reforms to be considered in the report), a press release by the then commerce minister highlighted that 7,000 steps have been taken by the government to improve ease of doing business in the country.
There is still a lot of work to be done. First, the report clearly highlights some weak spots in our business regulations—we must draw the right lessons. Areas like enforcement of contracts, registering property, etc, can be improved upon significantly. Furthermore, India is a vast and complex economy which cannot move forward without collaboration between the Centre, states and the private sector. It is encouraging to note that the government recognises the importance of this collaboration. The Union government has been organising workshops, brainstorming sessions with states/UTs. These offer a platform to develop a better understanding of reform measures and also facilitate learnings from each other. Reaching the government’s ambitious goal of breaking into the top-50 ranks is daunting, but this year’s performance should provide confidence on India’s ability to achieve it.
Public policy specialist, NITI Aayog. Views are personal