It’s not as easy as it seems March 2018 issue

It’s not as easy as it seems

Manish K. Pandey Editor | November 2017 Issue | The Dollar Business

The 2018 edition of the World Bank Doing Business Report is out. And, to the surprise of many, India has moved up a phenomenal 30 places to the 100th position in its annual Ease of Doing Business rankings. And, that’s not where the good news ends. India also features in World Bank list of top ten improvers for doing business among all countries across the world. “Among top improvers, Brunei Darussalam, India and Thailand implemented the highest number of business regulation reforms in 2016-17, with eight reforms each,” states the report.
Interestingly, in 2017 edition of the report India had moved up only one place from 2016, ranking at 130 out of 190 countries. The report, which ranks a country on 10 broad parameters (such as starting a business, getting electricity, registering property, getting credit, paying taxes, etc.), didn’t seem to recognise the efforts put in by the Modi-led Indian government to create a business-friendly environment in the country (at least, it was not reflected in last year’s rankings). In fact, India’s rankings have always been in the range of 130-140. The country has never achieved such a significant shift in the Ease of Doing Business Index that started in 2003. So, what changed in a year’s time?

Well, nothing changed in a year. It’s policy reforms of the last three and a half years that have now started showing results. Since the Modi-led government took over in May 2014, we have been seeing a push on two initiatives: ‘Make in India’ and ‘Ease of Doing Business’. While the former started gathering pace within a year the programme was launched, the latter, ironically, was yet to show results. For, many reforms were initiated only recently and required time to seep in through the system. A case in point could be the new bankruptcy law that was signed in May 2016 and came entirely into effect only in 2017. And then there was Goods and Services Tax (GST), the simplified new tax regime, that saw the light of the day on July 1, 2017. The reform has not only eased India’s cumbersome tax system, but has curbed tax evasion, improved compliance, and of course enhanced ease of doing business in India.
 
So far, so good! While the government should be happy that its efforts have paid off in general, it should not forget that a lot of ground still needs to be covered when it comes to parameters like trading across borders and enforcing contracts. Ironically, India has been ranked 146th amongst 190 economies when one considers the time and cost associated with the logistical process of shipping goods to and from overseas markets. [Ease of Doing Business report measures the time and cost (excluding tariffs) associated with three sets of procedures — documentary compliance, border compliance and domestic transport — within the overall export-import process.] What’s more? Even countries like Benin and Bhutan have been placed much above India, at 136th rank and 26th rank respectively, on this performance indicator. This clearly indicates the world’s perception of India’s foreign trade procedures. And perceptions do make a difference, at least in business if not anywhere else.

Indian policymakers also need to work towards  strengthening, as well as streamlining, its law enforcement system. Well, that’s what the Doing Business report says! India stands at 164th position (amongst 190 countries, just in case you’ve forgotten!) when it comes to the indicator that measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. And it goes without saying that having a weak enforcement system is as good as having no system.

If India really wants to create a conducive environment for businesses of global scale and foster ease of doing business in true sense, it needs to demonstrate the will to do so through its actions. No doubt, over the last few years, the government has introduced several measures for facilitating trade and improving ease of doing business in the country. But then it’s time the government also streamlines infrastructure and institutions facilitating trade – the very basis of a business-friendly environment. Well, you can’t build a great building on a weak foundation. Can you?!

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