Context: The recent acknowledgement of ‘data irregularities’ in the 2018 and 2020 reports of ‘’Ease of Doing Business Ranking” would lead to ‘minor blow’ to the Indian Government.
Minor Blow:
“Minor”: because these rankings do not lead to anything concrete such as increased domestic or foreign investment.
“Blow”. It is a blow because the credibility of these rankings, which the Government was trumpeting, is now in tatters.
Issues with the Ease of Doing Business in India
Federal Structure of India:
States impose the largest number of roadblocks to the path of doing business.
The Centre’s role is limited to some aspects like international trade, taxation and insolvency resolution.
For, E.g. restaurant need 15 licenses in India compared to four in Singapore and are mainly under the jurisdiction of states and municipalities like:
Licences for health trade,
Environment,
Fire,
Tourism,
Pollution,
Music,
Liquor,
Wine and beer (separately),
Legal metrology,
Police clearance,
Signage and operating timing.
A Flawed Index: the leapfrogging of India by 79 positions from a low rank of 142 in 2014 to 63 now, has been manipulated through determined efforts in exploiting Methodological weaknesses:
Disproportionate emphasis on insignificant changes:
By eliminating the need for a company seal or rubber stamp to open a bank account,
Dropping the need to submit a cancelled cheque with employee provident fund applications,
Removing the need for traders to submit hard copies of documents,
Increasing the capacity of an online customs payment gateway.
No much actual change in ranking:
The recalculated figures by shows that India should have had a higher ranking earlier (113 in 2012 instead of 132) and a lower rank in 2018 (114 instead of 100).
Non-conforming ground reality: Despite India ranking 8th among 140 countries under “cultural resources and business travel”, India ranks 190th in “tourist service infrastructure”.
Issues with the Centre’s role:
Rigid Taxation: Governments don’t like to lose. If some tax regime or provisions go against the Government, it changes the law.
Lack of confidence: Subsidies, arbitration awards are not paid fully, and therefore there is a lack of confidence.