Ease of doing business: Narendra Modi’s mantra of ‘Reform, Perform, Transform’ propels India to 100th rank

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India has jumped 30 places to 100th position in the World Bank’s ‘ease of doing business‘ ranking, helped by a slew of reforms in taxation, licensing, investor protection and bankruptcy resolution.

The ranking comes as a shot in the arm for the Narendra Modi government amid dissenting voices in certain quarters about the implementation of the Goods and Services Tax (GST) as well as demonetisation.

In its annual report ‘Doing Business 2018: Reforming to Create Jobs‘, the World Bank said that India’s ranking reflects nearly half of the 37 reforms, adopted since 2003, implemented in the last four years.

The ranking, however, does not take into the account business environment post implementation of GST, which weaved the country of 1.3 billion into one market with one tax and removed inter-state barriers for trade. World Bank vice-president for South Asia region, Annette Dixon said that GST was a complicated reform to have rolled-out. Steps taken by the government this year may take two to three years to show results. This factor will be considered next year or after that.

India, which was ranked 130th among the 190 nations, is “one of the top 10 improvers in this year’s assessment, having implemented reforms in 8 out of 10 ‘doing business’ indicators,” it said. This is the first time India has broken into top 100 nations. “The government is committed to further ease of doing business by bringing in more reforms,” said Finance Minister Arun Jaitley.ease-of-doing-business-listicleIndia is the only large country this year to have achieved such a significant shift. “The Government has undertaken an extensive exercise of stakeholder consultations, identification of user needs, government process re-engineering to match Government rules and procedures with user expectations and streamline them to create a more conducive business environment,” Prime Minister Narendra Modi said about this shift on Twitter. “The report acknowledges India as a top improver with the highest jump in rank of any country in DB Report, 2018. India is the only country in South Asia and BRICS economies to feature among most improved economies of the DB Report this year,” he added. He said that his mantra of  ‘Reform, Perform, Transform’ has lead to this improvement.

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The parameters that witnessed improvement in 2016-17 were India making it faster for start business, reduction in procedures and time required to obtain a building permit, easier access to credit, protecting minority investors, ease of paying taxes, trading across borders, enforcing contracts and making resolving insolvency easier, the World Bank said.

But it still lags in areas such as starting a business, enforcing contracts and dealing with construction permits. It takes 30 days now to register a new business, down from 127 days 15 years ago, but “the number of procedures is still cumbersome for local entrepreneurs who still need to go through 12 procedures”, it said.

“This is a major, major jump,” Rita Ramalho, Acting Director for World Bank’s Global Indicators Group, told PTI in Washington, attributing the climb of 30 places to the series of reforms undertaken by the Modi government since 2014. Annette Dixon, World Bank vice-president for South Asia region, said India’s strong reform agenda was responsible for its improvement, “Having embarked on a strong reform agenda to improve the business environment, the significant jump this year is a result of the Indian government’s consistent efforts over the past few years. It indicates India’s endeavour to further strengthen its position as a preferred place to do business globally.”

Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII), said, “The huge improvement in ranking and score will immediately boost investor sentiments. The latest report validates the commitment of the government to fast-tracking economic reforms, addressing red tapism and facilitating business. The surge in ranking by as much as 30 places is an outcome of key reforms including digitisation of processes, enhancing tax payment and access to credit…India is well on its way to emerge as a global leader in protecting minority interests and is currently ranked 4th in the world.”

The GST, which was implemented from 1 July, will get reflected only in next year’s ‘ease of doing business’ report. “GST reforms have not been counted this year. It would come into play for the report next year,” Ramalho said, adding that demonetisation was not covered.

worldbankIndia was ranked 130th for last two years. In 2014, it managed to get the 142nd spot.

According to the World Bank, New Zealand is the easiest place on the planet to do business, followed by Singapore, Denmark, South Korea and Hong Kong. The US and the UK are ranked sixth and seventh on the list.

Among BRICS countries, Russia tops the list with 35th position, followed by China which has retained its ranking at the 78th place for the second consecutive year.

The biggest surprise of this year, the authors of the report said, is India, which jumped 30 spots in one year by improving its score by 4.71 to 60.76 points. “India has improved a lot (this year), but there’s still room for improvement, So, I wouldn’t necessarily classify it as a nice place to do business yet, but definitely is in the right direction to become a nice place. It is much easier than it was two years ago,” Ramalho said.

Santiago Croci Downes, Acting Manager, Doing Business Unit at World Bank, said that in the 15 years’ history of this annual report, there have been only five countries like Georgia and Rwanda which made a massive jump in one year. But none of them was as big an economy as India.

Noting that India made a very big effort in the past two years, the World Bank said the results now reflect those initiatives.

“This is a continuous effort of two or three years. But there’s still a long way to go,” she said. India used to be in the bottom quarter of the distribution, now it’s in the middle which is a big improvement.

“It (India) is still a place where there is room for improvement in making the life of entrepreneurs, less bureaucratic, making transactions simpler and more efficient and less costly. So, there’s still significant room for improvement. But it was a very significant change and even not just in relative but also in absolute terms,” she said. “It is expected that India’s ranking will improve further in near future, once our reforms process in contract enforcement is put in place,” Arun Jaitley said adding that the economic reforms in the nation had started bearing fruit and the government’s stand on India’s growth roadmap was vindicated with positive rankings.

For entrepreneurs in India, doing business is simpler now, Santiago Croci Downes argued. Referring to the series of reforms being carried out by India, Downs said there is a willingness to improve the private sector and prioritise these. “If you’re asking me would India be 50 next year, I would say that’s very, very unlikely. But if you could tell me you would be 50 in five years, I will say maybe,” she said.

There are a few areas where there is much room for improvement such as enforcing contracts, which on an average in India is 1,445 days, besides the court system in India is very slow, she said.

“That’s one of the areas where India really lags behind compared to other countries,” she said, adding that easing property registration and property transactions is another area where things are not very efficient.

Junaid Ahmad, Country Director India from World Bank concluded, “Tackling these challenging reforms will be key to India sustaining the momentum towards a higher ranking. To secure changes in the remaining areas will require not just new laws and online systems but deepening the ongoing investment in the capacity of states and their institutions to implement change and transform the framework of incentives and regulation facing the private sector. India’s focus on ‘doing business’ at the state level may well be the platform that sustains the country’s reform trajectory for the future.”

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