Ease of Doing Business: Beyond Quick Fixes

Business Standard     31st August 2020     Save    

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.