Ease of doing business: Time for the Union government to get cracking

By: | Published: September 16, 2015 12:28 PM

Now that we know that Gujarat, Andhra Pradesh and Jharkhand are the leaders, other states that have been a magnet for business all along will hopefully work to get their act in place soon.

global businessesNow that we know that Gujarat, Andhra Pradesh and Jharkhand are the leaders, other states that have been a magnet for business all along will hopefully work to get their act in place soon.

The recent ranking of states based on implementing a 98-point plan on the Ease of Doing Business is a step in the right direction. Now that we know that Gujarat, Andhra Pradesh and Jharkhand are the leaders, other states that have been a magnet for business all along will hopefully work to get their act in place soon. Tamil Nadu that has attracted some of the biggest global businesses is ranked below both West Bengal and Uttar Pradesh, while Maharashtra is behind Odisha and Rajasthan. Similarly, while Andhra Pradesh is ranked second, it’s twin Telanagana is way down at 13. What that means is that these states will now have to work on the eight parameters―setting up a business, land allotment, environment procedures, labour regulations, obtaining infrastructure related utilities, tax procedures, carrying out inspections and enforcing contracts―that have been identified.

The big learning from the rankings by the World Bank and KPMG is that not one state has been classified a Leader (implementation level of 75% or more). Gujarat which lead the list has 71.14%, followed by Andhra Pradesh (70.12%), Jharkhand (63.09%). While 7 states are Aspiring Leaders (50%-75%) another 9 fall in the Acceleration Required (25%-50%) category. Half the states (16) are in Jump Start Needed category. The lowest 8 have scores below 10%.

Getting states ranked on the Ease of Doing Business fits in with the government plan to ensure that India makes it to the top 50 nations in the Ease of Doing Business rankings of the World Bank. Currently, India is ranked a lowly 142 among 189 nations. It’s the last among the BRICS, with South Africa (43) leading the grouping followed by Russia (62), China (90) and Brazil (120). Even Nepal (108), Indonesia (114) and Pakistan (128) are ahead of India. Just behind India are the West Bank and Gaza (143) and Gabon (144). Out of the 10 criteria evaluated by the World Bank, in only two does India make it reasonably high―Getting credit (36) and Protecting Minority Investors (7). However, it ranks 186 in Enforcing Contracts and 184 in Construction Permits. Not surprisingly, India ranks 158 in Starting a Business.

While getting the states to compete is fine, the Union government also needs to get its act into place. Some things that it could work on quickly include getting consensus to get the GST Bill through Parliament and reducing the problems that investors faced over taxation issues. Resolving these two issue itself would see India’s ranking rise substantially.

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