What India Can Do To Further Improve Its Position In The World Bank Rankings

Although the improved position in the World Bank rankings must be welcomed,  efforts should be broadened for further development.

In the latest release World Bank has ranked India at 130 of 189 countries on “Ease of Doing Business“. That is twelve places up from its ranking last year and four places up from its rank on the revised list.

The improvement in ranking is a reflection of steps taken by the government in fulfilling Prime Minister’s vision of making India the top investment destination. The jump is critical. It is for the first time India has reversed the decline in it’s ranking since the inception of the methodology.

Improvement in the provision of power to start a business and ease of getting connected to the grid is the most significant factor contributing to the jump. “Now companies can get connected to the grid, and get on with their business 14 days sooner”, the report said.

Also, the time taken to start a business has reduced from 127 in 2004 to 29 today. Elimination of minimum capital requirement to start a business, and the requirement to obtain a commercial paper to start a business has helped India improve its ranking.

In fact, India ranked 8th in terms of protecting minority investors and 42nd in getting credit. While the progress must be commended, the speed of reforms needs quickening. Especially on three fronts 1) ease of getting a construction permit 2) enforce-ability of contract 3) paying taxes.

On all the three fronts, our ranking is bleak, with the performance of 183, 178 and 157 out of 189 countries respectively. Notwithstanding the World Bank rankings, the poor performance on these parameters is not an acceptable situation.

The government is taking steps to address these issues by implementing the Vishwanathan Committee recommendations on entry and exit of a business, by setting up a committee under a retired judge to redraft the provisions of income tax law and repealing outdated laws creating barriers for businesses.

However, setting up of commercial courts and institutional mechanism for e-filing to speed up commercial litigation process needs to gain momentum. The success of ‘Start-up India, Stand up India’ will arguably depend on the strength of the pillar of ease of opening and closing a firm.

The infrastructure needed (roads, railways, ports, and airports) to fuel double-digit growth can only be sustained if a transparent, non-discretionary and time-bound system of giving permits is evolved, most importantly at the district level. This in no way indicates the absence of regulation, but point towards compliable non-discretionary regulation.

GST has been mentioned umpteen number of times and has still not been implemented. It appears that a visible political and a cognizant bureaucracy is working to tighten the loose ends. Importantly, the innovative mechanism to rank states on more than 300 parameters started by DIPP (Department of Industrial Planning and Policy, Government Of India) has catalyzed healthy competition among states to attract investment(competitive federalism).

For India to grow at rates of 9 to 10%, at least 8-10 states have to pose consistent double-digit growth. Finally, India should grow rapidly but with lots of diversification and improve it’s doing business ranking for the welfare of its citizens, not because the World Bank might recommend it.