India’s has seen a improvement in “Ease of Doing Business” rankings which was quite a surprise, and among the few pleasant ones in recent weeks & these rankings left us with two questions :
First, What did the government do right ?
Second, If business has become so much easier, why don’t we see a boom in new businesses and investment? Such questions are critical to help evolve a more focussed set of policy priorities for India.
Improvement in Ease of Doing Business Rankings :-
The jump in the ranking, from 100 to 77, is correlated with an improvement in the ratings, a jump of 6.6 per cent over last year.
This is the second year that India has seen a massive jump in the same ratings with its ranking going up by 23 places this year, on top of 30 places last year. In two years, therefore, India’s position has improved from 130 to 77.
Now what are the reasons behind improvements in rankings ?
- Of the 10 categories that together make up the aggregate index, eight saw some improvement over the last year, and two were the same.
- Construction permits and Cross-Border trade were two aspects that showed maximum improvement; index value for the two improved by 34 and 19 per cent respectively.
What still needs to be done on the ground ?
- Issues related to the daily running of a business :-
The various investigations conducted by the revenue department, or company law matters, or labour-related issues, or, for that matter, the various demands of the inspectors of quality and processes. Changes that can do away with such inspector raj require more than simply a technology infusion. They require a rethinking of the many rules and regulations governing this sector and the over-dependence on an ill-motivated bureaucracy and technocracy.
- Need to cover aspects which are not covered in ratings :-
The reality of business in India requires the entrepreneur to focus on a whole range of aspects not covered adequately in such ratings. For instance, businesses have a problem of employability, poor skills, corruption, and controls on internal trade, avenues for accessing capital for small and micro-businesses being some examples.
- Multi-sectoral issues :-
Needs to focus on multi-sectoral issues like enforcement of contracts, paying taxes, and registering property where improvements would require coordinated efforts across multiple layers of the government & legal and procedural changes would be more complex but it is also true that these are important aspects where much action is required.
- Dependence on IT :-
We need to recognise that dependence on IT has also perversely made things more difficult for those entrepreneurs who are less digitally able. This will no doubt change with time and familiarity, but it would require the government to constantly keep on working at making its IT-enabled interfaces more user-friendly for the small and micro-business entrepreneur.
To sum up, the ease of doing business ratings’ improvements are very welcome. However, the objective of improving India’s economic climate, requires the government to take on far tougher tasks, for which the focus and prioritisation need to remain on issues relevant for India, which may or may not be, captured in the ratings.