Ease of Doing Business in an uneasy India hides, not reveals: 

Ease of Doing Business in an uneasy India hides, not reveals

Context

The World Bank Group’s Doing Business 2018 report ranks India at 100 out of 190 countries

What is Ease of Doing Business Index?

  • The Ease of doing business index is an index released by the World Bank Group in its Doing business report.
  • Higher rankings indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • New Zealand has topped the Ease of Doing Business rankings in 2017.

What are the indicators on which this index is calculated?

  • Starting a business
  • Dealing with construction permits
  • Getting electricity
  • Registering property
  • Getting credit
  • Protecting investors
  • Paying taxes
  • Trading across borders
  • Enforcing contracts
  • Resolving insolvency

Where does India stand in the Ease of Doing business index?

  • India ranked 130 among 190 countries however, has not made any improvement from the last year as its rank has been downgraded to 131.
  • This lack of improvement in the rankings though Indian Government was hoping to jump substantially this year has triggered a strong reaction and disappointment.
  • Though several reform measures have been taken by the Government, it feels they are not reflected in these rankings.
  • The only bright side in these rankings is that India has improved substantially in getting electricity for businesses and enforcing contracts.
  • Out of the 10 parameters, India has slipped down in 5 parameters and on other 3, there is a status quo.

Why India should not base its result on basis of this index?

  • World Bank index is based on limited data.
  • There is a disjunct between how things get done in india and Bank’s methodological approach .Many achievements have not been covered by the report due to methodological issues.
  • Eg- According to DIPP, Online filing and payment of returns at the Employee Provident Fund Organisation has been implemented, but it was not considered by the World Bank, even after it shared “logs and voluminous evidence” of the same.
  • Bank’s report is based on data collected from very few cities.
  • Centre has only partial control over several of these sub indices as it needs states support to bring the required legislations.
  • It does not directly measure more general conditions such as a nation’s proximity to large markets, quality of infrastructure, inflation, or crime.
  • Rankings are incompletely reflective of the significant transformation in the overall business environment in key areas such as openness to FDI, online procedures, MSME facilitation

What are the loopholes in the ease of doing business index?

  • In India’s case, the business environment in only Delhi and Mumbai are used to compile the national ranking.
  • These rankings also focus a lot more on the laws and rules that are on the books and do not necessarily capture the daily experiences of businesses.

Conclusion:

  • The government initiated an online single window clearance system for faster approvals of building plans. This will presumably lead to obtaining building permits faster
  • The Government should not be obsessed about this Index although all other BRICS nations are ahead of India.
  • It should go ahead and keep on doing what it thinks is necessary for betterment of small and medium enterprises in coordination with the state governments.
  • However, setting a national target of attaining a certain rank has also helped in bringing consensus across other parties involved like state governments and judiciary to improve overall environment of India in doing business.        
  • A lot of the parameters on which our rankings are poor are the ones where the processes are yet to be modernized.
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