Doing Business Report 2019 Reading Between the Lines
A democratically elected government- in a political setting where different political
parties subscribe to dissimilar ideologies- cannot escape criticism. You can pave the way to speedy resolution of bad loans by enacting a long-pending bankruptcy law, can turn a fragmented market into a single entity by bringing a nation-wide goods and services tax, can act as an enabler for loan-seekers through Awaas Yojana and Mudra scheme, can secure a rare waiver from US sanctions on Iran,and can help the country take a quantum leap in the World Bank’s Doing Business Report (DBR) in a matter of just 4 years, but critics will not stop targeting you. And that is dear readers, the beauty of a multi-party democracy.
We have much to discuss, but first things first. India is shining and it is shining bright. Improving rank by a whopping 53 positions in mere two years in DBR is no mean feat. This clearly boils down to the fact that you are performing way better than other economies when it comes to being an enabler for business environment. And this further translates into great social achievement since new businesses act as drivers of economic growth, employment generation, equitable income distribution and upliftment of the hitherto impoverished citizens. By acting as a supporting pillar to businesses, the present dispensation has also indirectly benefitted consumers, for every new entrant brings with it competition, price discovery and an environment where efficiency is rewarded. For example, Jio’s entry into the telecom sector rationalized tariffs and as quoted by the Prime Minister, today 1 GB data is cheaper than a soft drink bottle.
In particular, India fared better than last year on six parameters in the recently released DBR-2019. In the ‘construction permit’ indicator, the country improved its ranking from 181 in 2017 to 52 in 2018. This sounds unbelievable but the World Bank assessment duly noted how procedures were reduced from 37 to 20 in Delhi and 24 to 16 in Mumbai. Similarly, we advanced on building quality control index and time consumed in obtaining requisite clearances. Construction, be it of a national highway or road or a housing complex for low and middle income group households, is key to inclusive growth and such a giant leap is representative of what good governance can produce. The country also fared exceptionally well in the ‘trading across border’ parameter, all owing to such policy actions as a single window clearance (SWIFT) and electronic filing of documents (eSANCHIT). In numerical terms, we now rank 80 on this parameter as compared against 146th rank in 2017.
Other indicators where India produced superior results than last year include ‘starting business’ where we now stand at 137th position (156th in 2017; drivers being reduction in procedures and time, and a single form for company incorporation); ‘getting credit’ where we now stand at 29th position (22nd in 2017; drivers being use of tech for fast approval of loans and schemes like MUDRA); ‘getting electricity’ where we now stand at 29th position (24th in 2017; drivers being reduction in overall procedures to secure a new connection); and ‘enforcing contracts’ where we have gained 1 point and now stand at 163rd position (drivers being a predictable and time-bound dispute resolution process). The upward trajectory we have realized in these indicators can be attributed to astute and fast decision-making by the government and its agencies.
Yes, there are a few indicators where the country could not better its position this year. But one has to go to the bottom of the issue to identify reasons. Our ranking in the ‘paying taxes’ indicator has improved significantly in the last four years, which means that many reforms by the government have already been considered in the past. Another parameter is ‘registering property’. This area has to be rationally studied. India is a country with diverse interests and such roadblocks as tribal rights (which must be respected) over land, ambiguity in land titles (which is being addressed by digitization of records with assistance from centre) and environmental concerns are to be sensibly removed to improve our ranking in this category. As far as the ‘protecting minority investors’ indicator is concerned, we rank here in a single digit, backed by commendable work of SEBI and concerned ministries.
Having rejoiced in the success, it is imperative that policy-makers also read between the lines. The national capital is notorious for its air pollution and the ‘construction permit’ indicator, where we have attained unprecedented feat, holds a clue. While new construction is much-needed, it cannot be done at the expense of environment. It was government’s job to cut the red tape and it has done so. Now, the responsibility rests on the shoulders of implementing agencies that are to weigh projects vis-à-vis their impact on climate and well-being of habitants. Indiscriminate construction can trigger illegal mining of sand, destruction of forest cover and spike in particulate matter in the concerned area. Similarly, the IL&FS episode has sent shivers down the NBFC sector, with liquidity crunch for the sector becoming an area of concern. If not handled astutely, this can hamper the growth in ‘getting credit’ indicator.
Although the World Bank’s Index is centered on how well the country fares with respect to according a red carpet to new businesses, India should think beyond. For example, getting electricity connection is not enough; to sustainably run the industrial sector in the long-run, we are cut our dependency on imported coal and make sure that the power sector is timely brought out of the financial crisis with minimal damage to concerned stakeholders. These challenges will remain in the short-run but a comeback of the BJP-led government in 2019 will enable time-bound elimination of impediments to growth. For now, it is time we celebrate the fact that World Bank has acknowledged our country as one of the top improvers in the latest report (a distinction we also secured in last year’s DBR) and we now lead the South Asian countries (in 2014, we ranked a dismal 6th).
PS: A government that works rationally, is determined to rein in fiscal and current account deficits, and never shies away from implementing radical reforms that are rewarding in the long-run, deserves to be criticized by its political opponents, for this criticism will only help them emerge as a true winner by defying alloddsandrealizing the ultimate goal of inclusive development.
By Dr. Sunil Gupta