It is the ‘conduct of business’ parts that need drastic reforms for a better business climate.
Implicit in the World Bank clarifying that the “changed political scenario” (read as NDA coming to power at the Centre) is not reflected in India’s latest showing in the Bank’s Ease of Doing Business index is the anticipation of a better business climate in India accruing from the government’s reform moves. India slipped two places from the revised rankings for last year, from 140th to 142nd. Given that the business environment only upto June 1 this year was considered for the rankings, the impact of the incremental steps of the central government, along with those of states like Rajasthan, were not reflected in the Bank’s assessment, which makes the Bank’s clarification seem that much loaded with cautiously articulated optimism.
For the NDA government, the individual parameters considered for the rankings and India’s scores against these provides a ready diagnosis. While starting a business remains a sore point, the government has already initiated steps to take care of this, like reducing the registration fees for new enterprises, etc. It is the environment in which business is conducted and sustained that the government must act on. Given India’s score on “enforcing contracts” remains its worst showing this time—it takes three years and eight months to get a contract enforced in India as compared to 150 days in case of Singapore,the best place to do business—the government needs to ensure upsets, like the delayed and inadequate gas price hikes or the cancellation of intra-circle roaming, are best avoided. The litigation ensuing from the sovereign changing contract terms just adds to the delay. Similarly, on taxation, the government should get its act together and do away with retrospective taxes, which create uncertainty despite being reined in by the government. Exiting a business, too, will remain nightmarish for investors as long as the stringent labour laws, especially those governing closure of a business, remain in place.