analysis

Updated: Nov 16, 2017 18:42 IST

The World Bank, released the Doing Business (DB) Report, 2018 on October 31, 2017. India ranked 100 among 190 countries assessed by the World Bank, a quantum leap of 30 notches over its rank of 130 last year. For years, India had languished in the 130s range.

The DB report is a useful metric of assessing how businesses, old and new, are finding conditions to do business in the country. However, it does not capture the full picture. The impact of reduced corruption in the country, following demonetisation, and the integration of the country in to a one tax system, namely the GST are fundamental changes to the Indian economic architecture. Ease of business taken together with these bold policy moves, means India is likely to keep the momentum of developing conditions more conducive for doing business. This can be excellent news for job creation, at a time when technology and automation are reducing jobs in the economy. Enabling efficient and easy conditions, particularly for SME businesses, has to be the panacea for India’s un-employment problems, as well as unleashing the potential of our demographic.

The DB Report is an assessment of 190 economies and covers 10 indicators which span the lifecycle of a business. According to the World Bank, New Zealand is the easiest place to do business, followed by Singapore, Denmark, South Korea and Hong Kong. The US and the UK are ranked 6th and 7th on the list.

China, our immediate competitor, on the other hand, has maintained its ranking at 78 from 2017. While the gap between 78 and 100 may seem small, yet is not easy to bridge. For one, the rankings are competitive, which mean that not only does India have to put in efforts in several of the 10 areas that World Bank assesses, but also has to be seen doing better than other countries that are also working to improve their rankings. India has improved its rank in 6 out of 10 indicators and has moved closer to international best practices. Significant improvements have been made in areas such as resolving insolvency, paying taxes, protecting minority investors and getting credit. India stands out this year as one of the 10 economies that improved the most in areas measured.

India however still has to go places in certain areas. India still lags in areas such as starting a business, enforcing contracts and dealing with construction permits. In the category of starting a business, the need for local entrepreneurs to go through 12 procedures to start a business, as opposed to five in high-income countries, worsened India’s ranking in the category to 156 from 155 last year. There was also a major slip in ranking in the category of registering property — from 138 last year to 154 this year — due to increase in time taken, cost and number of procedures for registration. Tackling these challenging reforms will be key to India sustaining the momentum towards a higher ranking. This will require not just new laws and online systems but deepening the ongoing investment in the capacity of States to implement change and transform the framework of incentives and regulation facing the private sector.

While sceptics may argue about the tangible benefits on the ground, what is important to note is the clear intent and capacity of the current administration to “reform, perform and transform” and we need to understand that most of these improvements in indicators are still works in progress. Global investors and corporations do take note of this very seriously in forming their views about cost of capital of doing business in a particular country. In my view, this improvement in ease of doing business in India should significantly reduce the premium implicitly included in cost of capital of doing business in India and make India a favourable investment destination.

Deep structural changes accompanied with tactical improvements means that India will start to witness the benefits of her tenacious labour. The momentum is now building up and investment and growth will be its natural outcome. The Indian economy is poised to move into the next orbit.

Shaurya Doval is Director India Foundation and Managing Director Gemini Financial Services

The views expressed are personal