1. Ease of doing business: Hardly any improvement in land, labour, capital & entrepreneurship

Ease of doing business: Hardly any improvement in land, labour, capital & entrepreneurship

The government has taken up a series of measures to improve ease of doing business in the country. The emphasis has been on simplification and rationalisation of old rules and regulations, and introduction of information technology (IT) to make governance efficient and effective.

By: | Updated: May 27, 2016 7:38 AM
Since the focus is to provide a facilitative environment to the industry vis-a-vis the ambitious Make-in-India initiative, PHD Chamber of Commerce and Industry has conducted a survey to assess improvements in the ease of doing business on the completion of two years of the NDA government. (Reuters) Since the focus is to provide a facilitative environment to the industry vis-a-vis the ambitious Make-in-India initiative, PHD Chamber of Commerce and Industry has conducted a survey to assess improvements in the ease of doing business on the completion of two years of the NDA government. (Reuters)

India is one of the fastest growing economies and a bright spot in the global ecosystem. The government has taken up a series of measures to improve ease of doing business in the country. The emphasis has been on simplification and rationalisation of old rules and regulations, and introduction of information technology (IT) to make governance efficient and effective.

This has lead to an improvement in India’s rank in the ease of doing business index from 140 in 2014 to 130 in 2016. According to the Global Competitiveness Report 2015-16, there is a significant jump in India’s Global Competitiveness Index by 16 places—from 71 to 55.

Since the focus is to provide a facilitative environment to the industry vis-a-vis the ambitious Make-in-India initiative, PHD Chamber of Commerce and Industry has conducted a survey to assess improvements in the ease of doing business on the completion of two years of the NDA government. The survey rated ease of doing business at 4.6/10.

In this survey, business firms unanimously feel that there is some improvement in the sentiment for doing business, but there is a long way to go for a visible change at the ground level. While some parameters have attained a good score from respondents, including improvement in the availability of adequate infrastructure (5.6/10), improvement in investor-friendly environment (5.4/10), it points out that the country has to undertake more reforms.

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There is also an improvement in bureaucracy with a score of 5.2/10, as businesses believe that they are now more aware of changes in policy environment and are serious towards implementing policies. However, improvement in interface with the bureaucracy (score of 4.2/10) is still not according to their expectations.

There has been improvement in availability of utilities (5.2/10) including water, power, fuel and telecom. But survey highlights that the government has a long way go to improve distribution of utilities. Availability of credit, once considered a major hurdle in the ease of doing business, has seen some improvement (5.2/10), but MSMEs still face problems in procuring credit from banks.

Most businesses face issues while dealing with tax authorities and settling tax disputes, and a majority of respondents expressed their annoyance at the lag in implementation of GST.

Regulatory and procedural bottlenecks are a major concern (4/10). Few respondents feel that Inspector Raj still persists in the economy; this needs to be addressed at the earliest.

There is hardly any improvement in the four factors of production (4/10) including land, labour, capital and entrepreneurship. Labour laws have not yet been simplified and there is still no clarity on the land acquisition policy. Further, transaction costs remain a major challenge for most businesses and costs of borrowings are very high.

Almost all respondents are of the opinion that the government must rethink labour laws to pursue its agenda of reforms. The Child Labour (Prohibition and Regulation) Amendment Bill is pending in Parliament, while various other Bills including the Employees’ Provident Fund and Miscellaneous (Amendment) Bill, the Small Factories Bill, the Labour Code on Wages and the Labour Code on Industrial Relations are either pending with the law ministry or the cabinet. Respondents feel that the government must work towards speedy passage of these Bills. Notwithstanding the mixed response to ease of doing business, businesses unanimously feel that improvement in macro-economic fundamentals has accelerated on account of the dynamic economic vision of the government, supported by RBI’s calibrated policy measures on inflation and growth.

Benign global commodity prices have helped inflationary expectations to remain under control. Barring exports growth, of the seven basic indicators, there is significant improvement in six indicators including growth of GDP, inflation, industry, FDI inflows, foreign exchange reserves and stock market.

The IMF has projected India to grow at 7.5% in 2016. According to the Economic Survey 2015-16, India’s long-term potential GDP growth is 8-10%.

The government, clearly, faces heightened expectations to deliver reforms speedily, promote good governance and nurture a business friendly environment while putting the economy on a sustainable high growth trajectory.

The author is chief economist, PHD Chamber of Commerce and Industry

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