Follow-up action on ease of doing business

Nantoo Banerjee

Jumping 30 steps in one year in the global perception parameter on ‘the ease of doing business’ by India is undoubtedly a remarkable achievement. Yet, the country has a long way to go to be recognised by investors across the world as among the most desirable places to do business. The 15th edition of the World Bank's Doing Business Report, 2018, projects the country as a substantially easier place to do business than it was a year ago.  India’s progress in this regard looks exceptional. The World Bank’s annual study rates 190 countries on the ease of starting and running businesses. Its 2014 report placed India at 134. In 2015, its rank was 142. In 2016, it was 131 and in 2017, it was 130. This indicates that the ranking is not static. India slipped 11 places in the 2015 report. A few noteworthy things in the latest report showed India’s population as 1,324,171,354 and GNI per capita US$ 1,680. Apparently, the study covered the data from Mumbai and Delhi. India covered 60.76 steps in terms of doing business, denoting its ‘Distance to Frontier’ pegged at 100. The regional average for South Asia is 53.64. Incidentally, China, which is ranked 78th, covered the distance of 65.29, and Mexico, ranked 49, covered the distance of 72.27. They show that India has still a long way to cover the ‘Distance to Frontier’ if it wants to improve its ranking to 50 from the current level of 100.
The distance to frontier (DTF) measure shows the distance of each economy to the “frontier,” which represents the best performance observed on each of the indicators across all economies in the Doing Business (DB) sample since 2005. An economy’s distance to frontier is reflected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier. The humps on way to frontier include the ease of starting a business; dealing with construction permits; getting electricity; registering property; getting credit; protecting minority investor; paying taxes; trading across borders; enforcing contracts and resolving insolvency. India received as many as 80 points in the category of ‘protecting minority investor’ taking its global ranking to the 4th position in this area. However, India does not seem to do well in terms of enforcement of contracts and fast-tracking construction permits. Interestingly, BloombergQuint quoted NITI Aayog’s Amitabh Kant saying “India fares very badly in enforcement of contracts," commercial cases take around 4.5 years to be settled and there are too many adjournments. “We need commercial courts, online registration of cases, and to ensure there are no adjournments after three adjournments. If we are able to do that there is a big chance for a substantial jump,” Kant said. Interestingly, minutes after the report was released, Prime Minister Narendra Modi’s tweet made an honest admission: "It has never been easier to do business in India. India welcomes the world to explore economic opportunities our nation has to offer”. Modi promised to take steps to further improve the rankings. Finance Minister Arun Jaitley’s tweet added a new dimension to the achievement. It said: “The ease of doing corruption has been replaced by the ease of doing business.”
The next step to ensure a further ease of doing business in India is to make ‘doing corruption’ more difficult. A strong administrative reform will certainly help. The Inspector Raj still thrives with official clearances and inspections that are usually linked with project executions. Moreover, a chain of judicial trials and interferences can lawfully delay any project indefinitely to make it financially unviable, if and when cleared. Several government projects themselves are hanging fire on account of prolonged judicial trial. Maybe, India can follow the latest example of the 78th ranked China, which is less than five steps ahead of India on the way to the Doing Business Frontier, to serve some serious warnings to the corrupt and their practices. China’s anti-graft watchdog had punished roughly 1.34 million officials in the last four years under President Xi Jinping’s anti-corruption drive. Xi’s anti-graft campaign targets “tigers and flies”, meaning both high and low ranking officials. Those punished for graft during this period include 648,000 officials mostly engaged in small scale corruption. Several high-ranking figures and party functionaries had also been booked. In last August, the head of the anti-graft committee for China’s Ministry of Finance was himself put under investigation for suspected graft.
The best way to impress business investors is to prove that the government has the ability to implement agreed policies, programmes and projects. Analysts agree that in the long run, the race among countries in the business and economy fronts will be won or lost on the basis of support the government and the society effectively accord to entrepreneurs to generate resources to the advantage of both the local and global community. The people must have trust in administrative machinery that is able to deliver its promises. Singapore, the 2nd ranked country in the Doing Business report and one of the world’s most advanced economies, boasts an excellent administrative system as well as most efficiently-run Corrupt Practices Investigation Bureau (CPIB). The latter, founded in 1952, is one of the oldest agencies in the world dedicated to fighting corruption. A strong political will has provided its foundation.  The framework of corruption control consists of four pillars — effective anti-corruption acts, effective anti-corruption agency, effective adjudication (or punishment) and efficient government administration. Singapore has covered 84.57 steps to the ‘Distance to the Frontier.’ Though India has all the four pillars, few will disagree that they are, as yet, neither very effective, nor quite efficient. (IPA)

Thursday, 9 November, 2017