Soaring ease

The 2019 version of World Bank’s Doing Business index, released on Wednesday, saw India register a jump of 23 spots over the 2018 rankings. The news is likely to have a salutary effect on the morale of the central government, which has found itself in the middle of a season dominated by disturbing news on the economic front — from persistently high fuel prices to worsening macroeconomic stability indicators to repeated confrontations between the country’s central bank and the Union finance ministry. The Narendra Modi-led government could be very proud of the latest rankings; India is one of the only two countries (out of 190) to figure in the top 10 improving nations for two successive years. After a disappointing performance in 2017, when India improved by just one rank, it gained 30 ranks in the 2018 edition. Aided by the latest jump, India now stands at 77. 

That’s an impressive achievement not just in itself but also when one considers India’s past performance. In the years leading up to Mr Modi’s rise as the prime minister, India was steadily losing ranks — from 131 in 2012 to 142 in 2014. But since then there has been a rapid turnaround and Mr Modi and his government deserve all the credit for it. While in 2014, all the BRICS countries were far ahead, India in the 2019 edition stands well ahead of South Africa (82) and Brazil (109), and is fast closing the gap on China (46) and Russia (31). India is now the best-ranked country in South Asia and has almost caught up with other competitors such as Indonesia (73) and Vietnam (69). The significant improvement is attributable to a variety of reforms, including the introduction of the goods and services tax (GST) and the Insolvency and Bankruptcy Code (IBC) apart from some tweaks in labour regulation. As a result, India improved in six key areas especially in starting a business, access to credit, getting construction permits, getting electricity, paying taxes, and in trading across borders.

The current calendar year had started with the then World Bank Chief Economist, Paul Romer, who recently received a Nobel Prize for Economics, kicking up a massive controversy about the credibility of Doing Business rankings. India’s sustained rise in the rankings is perhaps the best answer to questions about the credibility of India’s reform momentum. However, this is not to turn a blind eye to what still ails at the ground level. For one, despite all-round improvements, there are key areas where India continues to lag. For instance, on enforcing contracts, an aspect of traditional weakness, India continues to falter. Further, despite the GST and the IBC, India’s overall score on paying taxes and resolving insolvency stays at an unacceptably low level. In fact, even though both the GST and the IBC helped, India’s ranking per se on paying taxes and resolving insolvency actually fell. This shows the extent to which the actual implementation of these reforms needs to be made more effective. Moreover, it must be underscored again that these rankings are based on improvement as witnessed in two of the main cities — Delhi and Mumbai — both of which benefit from being the political and financial capitals of the country. The reality in other prominent cities and, indeed, smaller towns is most likely worse. To expand the scope of reforms so that they reach the smallest and remotest of all the enterprises, states must show the initiative to ensure that the rest of the country, too, improves the ease of doing business.