Ease of Doing Business: Beyond Quick Fixes

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.