India has moved up four notches to 130 in the latest World Bank’s Doing Business rankings, barely four positions better than the previous year’s recalculated 134th. This isn’t quite the movement the government would have expected when Prime Minister Narendra Modi launched his ‘Make in India’ initiative last year, vowing to remove bureaucratic sloth, eliminate red tape and turn the country into a manufacturing powerhouse. Over the years, the Doing Business report has evolved into the primary guiding metric to judge countries on business-friendliness. The critical aspect is that the rankings are based on procedural and administrative ease or the lack of it.
The Doing Business report, first published in 2003, seeks to go behind the usual macroeconomic aggregates such as growth and inflation, to analyse an economy through the prism of 10 not-so-visible parameters. Quite often these metrics, such as starting a new business, the number of taxes that businesses have to pay and import-export procedures, escape the attention of mainstream analytical debates. Yet, these factors, embedded in the underlying environment, deal with the regulatory system, the efficacy of the bureaucracy and the nature of business governance. India may be the world’s fastest-growing economy, but it remains a complex place to do business in. For instance, businesses in India, on an average, have to pay a total of 33 taxes, reflecting inefficiencies in the system that is dominated by a web of local and central levies. That is precisely the reason why it is critical to implement the Goods and Services Tax (GST) to stitch together a common market. Likewise, it takes 191 days and 33 procedures to secure all construction permits for a project in India. Registering a property takes 47 days involving seven days. This is exactly the reason why easier land buying rules are the need of the hour to aid investment.
India’s business-friendliness could be worse if the state of crumbling infrastructure, which is not captured in this report, were to be taken into account. It is quite often that the unheralded engines of entrepreneurship and employment who bear the brunt of creaky roads and ports. The good news is that over the last 12 months, as the World Bank report has shown, India has done well in two major gauges: Starting a business and the securing an electricity connection. The ability to leapfrog to into the elite top-50 club of the Doing Business ranking will eventually boil down to India’s political willingness to sustain high rates of growth and investment.