Siddhanth Goel
Christ (Deemed to be University), Bengaluru
Introduction:
No doubt India has jumped from 142nd rank in 2014 to 63rd rank in 2019 in Ease of Doing Business (EoDB) according to The World Bank but the question remains the same, “Has the working conditions really improved in India in these 5 years?” The countries are been ranked on various parameters like starting the business, accessibility to the resources, getting credits, etc. and a country like India has always failed to fulfill these needs of businesses. So, what has changed in these 5 years?
Parameters of EoDB Ranking:
EoDB by World Bank is one of the most reliable sources for all the investors to look at before investing in any country and becomes equally important for us to know that on what basis they have been ranking countries for so many years. They collect the data through questionnaires and research papers that contribute to the rankings. Once collected they calculate and recalculate all of it for one year to give reliable and comparable data. The various aspects that they look at are starting a business, construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.
Reasons Underlying Improvement in Rank:
Though India has improved itself by 79 positions still the EoDB says that India is not a place to start the business. All this data is true but we forget one thing and that is data does not always give the true picture. This survey is done to keep a check on the red tape scenario and often omits a lot of other contributing factors. But still, this data is not completely false and speak some truth. India has improved a lot on insolvency and bankruptcy code. This code aims to reduce the time for resolving insolvency issues and protect the interest of small investors. Also, India has highly improved itself on infrastructure. Like the government has started privatizing the airports, construction of highways and tech parks, and India’s government success of continuing projects in Mumbai to develop infrastructure despite the change in government. India has continuously improved on areas like trading across borders and paying taxes. The time needed for the logistical process for trade across the border has been reduced and also the recovery rate for the creditors has improved. Junaid Ahmed, World Bank Country Director in India said,
“India’s impressive progression in the Doing Business rankings over the past few years is a tremendous achievement, especially for an economy that is as large and complex as India’s. Special focus given by the top leadership of the country, and the persistent efforts made to drive the business reforms agenda, not only at the central level but also at the state level, helped India make significant improvements. The focus now needs to be on continuing this trend to maintain and improve its ranking.”
The Ground Reality:
But still, the ground reality is different from all of this. Even today almost for every legal work or dealing with government bodies, it needs some greasing of hands in India to do business. Where everyone is moving towards automation, in India we are required to give our physical presence and still, the work remains and cost us a lot of time. It increases the time required for claiming any document or getting any certificate or permission or license to do business. In India, the manufacturing industries still need to conform to 6796 compliance requirements. In India to start a restaurant or bar, businessmen need a minimum of 12-16 licenses which is almost the 4 times of what is needed in Singapore, and for getting a gun its just 19 licenses. So, India its easier to get a gun than to start a business. India still needs an average of 18 days to start a new business whereas, in countries like New Zealand, it takes a day at maximum. To get the basic amenity like water, it needs approximately 5 weeks. How then anyone can be motivated to invest in India or to start any business in India?
Conclusion:
Though the data shows that India has improved a lot but according to me it will be our ignorance towards reality if we completely believe that. It’s not wrong to bring up the data to make any judgment or to take any decision but knowing ground reality is equally important. It’s not wrong to say that India has improved a lot since 2014 for doing business but still, there are many potholes that need to be covered to reach the goal of entering and maintaining a position in the top 30 EoDB. India still needs to cover a long distance and it will take some time knowing the history of Indian business.
REFERENCES:
- Rankings. (2019). World Bank. https://www.doingbusiness.org/en/rankings#
- Roche, E. (2020, January 31). It’s easier doing business in India now, but starting up is still hard to do. Livemint. https://www.livemint.com/budget/economic-survey/it-s-easier-doing-business-in-india-now-but-starting-up-is-still-hard-to-do-11580492222123.html
- Doing Business 2020: Reforms Boost India’s Business Climate Rankings; Among Top Ten Improvers for Third Straight Year. (2019, October 24). Retrieved from https://www.worldbank.org/en/news/press-release/2019/10/24/doing-business-india-top-10-improver-business-climate-ranking
- Sriram, R. (2020, January 10). Is India on the verge of an infra boom? The Economic Times. https://economictimes.indiatimes.com/markets/stocks/news/is-india-on-the-verge-of-an-infra-boom/articleshow/73181535.cms?from=mdr
- NewIndianXpress. (2020, January 31). Economic Survey 2020 paints the reality of doing business in India. Retrieved from https://www.newindianexpress.com/business/2020/jan/31/economic-survey-2020-paints-the-reality-of-doing-business-in-india-2097277.html
- Paliwal, A., 2020. India Not A Place For Starting Business, Says Ease Of Doing Business Report. [online] India Today. Available at: <https://www.indiatoday.in/business/story/india-not-a-place-for-starting-business-says-ease-of-doing-business-report-1612570-2019-10-24> [Accessed 26 June 2020].
Critical point which might have been added-
While considering EODB ranking, only 2 cities are being studied for consideration – Delhi and Mumbai. In rest of india, it might be more difficult or easier to start a new business. We can’t know for sure unless india starts its own methodology for ranking cities based on business friendly environment parameters.