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India’s performance remains poor in at least five of the 10 parameters, wherein its ranking remains below 100. Photo: Mint
India’s performance remains poor in at least five of the 10 parameters, wherein its ranking remains below 100. Photo: Mint

NDA govt’s policies helped India jump 23 ranks in doing business

Better ranking is result of a culture of easy business rules created through principle of 'competitive federalism'

New Delhi: At Manesar, Haryana, 75 professionals work overtime everyday to clear the 12 to 15 SPICe (Simplified Proforma for Incorporating Company Electronically) forms filed electronically by individuals to incorporate a company. Across India, 1,100 SPICe forms are cleared daily, a job that would once have taken up to two weeks.

Measures such as this have helped India’s ease of doing business ranking jump 23 places to 77 this year. The World Bank Doing Business report weighs how easy or difficult it is for private enterprises to meet government regulations.

The improvement in ranking is the result of Narendra Modi’s “whole-of-government" approach, led by the department of industrial policy and promotion (DIPP) with repeated nudges from the Prime Minister’s Office.

Hits and misses

In the latest Doing Business report, which carries out field surveys and interviews corporate lawyers and company executives in Delhi and Mumbai to decide the rankings, India shot up sharply on two parameters: “dealing with construction permits" and “trading across borders" to the 52nd position from 181 a year ago, and 80th from 146 respectively. The introduction of a single-window clearance system in Delhi and the online building permit approval system in Mumbai in the second half of 2017 helped India improve its ranking in “dealing with construction permits". The reduced time and cost to export and import through various initiatives —including the implementation of electronic sealing of containers, upgrading of port infrastructure and allowing electronic submission of supporting documents with digital signatures—helped improve the “trading across borders" ranking.

India’s strides in ease of doing business have drawn the attention of the world. We are seen as a bright spot globally. - Narendra Modi, Prime Minister of India

However, India’s performance remains poor in at least five of the 10 parameters, wherein its ranking remains below 100. These are: “starting a business" (137), “enforcing contracts" (163), “registering property" (166), “paying taxes" (121) and “resolving insolvency" (108).

By amending the relevant Act, the government facilitated the establishment of commercial courts across 250 districts, which may improve India’s ranking in the “enforcing contracts" parameter next year if these courts dispose of cases faster. To improve on other parameters such as “registering property", ownership and titles need to be online which comes under the local government. Particularly disappointing have been India’s low rank in “paying taxes" and “resolving insolvency" despite measures such as the goods and services tax (GST) and Insolvency and Bankruptcy Code. However, as refunds become easier under the GST, especially for exporters, and resolutions under the IBC improves, India is likely to significantly improve its ranking in these two parameters.

Secret recipe to success

Soon after he took office in 2014, Prime Minister Modi set an audacious target of getting India’s ranking to 50 in the Doing Business list. An all-out effort started to not only improve India’s global ranking, but also to create a culture of easier business rules across states through Modi’s trademark principle of “competitive federalism". However, success was not easy to come by.

There was no improvement in India’s ranking between 2015 and 2016 despite significant efforts on many fronts. The government was quick to realize that it was not enough to make changes on files. Stakeholders had to be aware of the changes and be able to benefit from them. The DIPP roped in various agencies for creating what its secretary Ramesh Abhishek called a “feedback loop" with stakeholders, apart from effective communication with the World Bank.

“All this combined over a period of time has delivered results. The lesson is to be patient. Results don’t come very easily here. The reforms that we did in 2015, 2016, 2017 are getting reflected now. This is because immediately after reforms, users don’t give the feedback that ‘everything is working fine now’. They genuinely point out loopholes, so we have to fix those problems," said Abhishek in an interview.

Low hanging fruit?

Critics claim progress in Doing Business ranking is a low hanging fruit that the government has captured, and that it may give a false sense of progress on the ground.

The fact that the World Bank ranking does not include issues such as land acquisition and labour regulations, which top reform advices by international agencies, helps India.

Former chief statistician of India, Pronab Sen, says credit should be given to the government. “However, we need to improve our own specific problems not captured in the Doing Business ranking, which mostly caters to problems faced by large enterprises. India is unique because of the large proportion of micro, small and medium enterprises, and the problems they face are completely different from their large counterparts."

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