Dramatic improvement in ‘Ease of Doing Business’, yet a long way to go
There has been a lot of noise coming from both the Government and its critics on social media about India's rise from 130 to 100 in the World Bank's ‘Ease of Doing Business' survey. While there is no doubt that such an improvement should be hailed and the reforms enabled by the Narendra Modi regime particularly with regard to company registration and getting permissions to operate are laudable, this should not be seen as enough. The malcontents from the Opposition aided and abetted by anti-Modi online portals have pointed out that the survey takes into account only the cities of Mumbai and New Delhi. Well, this survey has always had only India's two largest cities as the terms of reference and those terms of reference have not changed so the malcontents are exhibiting clear malafide in their rather specious criticism on this count. But should the Government be as cock-a-hoop as it has been about this surveyIJ We think not. There has been fairly valid criticism about the implementation of the Goods and Services Tax (GST). While GST did bring the nation under one taxation system, the plethora of rates has led to needless complexity. And while the complexity of rates should be untangled as soon as sales data is available, the rather needless reporting structures imposed on many small traders have raised their hackles. GST might have eased things a bit for larger companies, but far from making business easier in India, it might make things tougher in the short-term. That said, there will most likely be significant medium to long-term benefits from GST and despite the Opposition criticising the Government on its implementation, the vision of GST outlined by the Congress was little different. The lack of comprehensive labour reform has also been a huge factor in holding India back and has prevented companies from hiring large numbers of employees — as a result, much of the job market growth has been through short-term contractual labour and all governments, at the Centre at in the States, are guilty on this count.
Coming back to the survey, there is no doubt that India's two largest cities account not only for a vast amount of the nation's wealth but also a majority of listed companies — but apart from them, the southern metropolises of Bengaluru, Chennai and Hyderabad, and the States of Gujarat and Maharashtra, one could successfully argue that doing business in small-town India has not really improved. Investments into India too have been relatively thinly spread over the past few years. A lack of proper physical infrastructure and a moth-eaten education system unable to turn out employable workers is impacting the country adversely and the justice system, while faster on commercial cases than civil/criminal cases, is still extremely slow and this is also impacting India's competitiveness. The survey, however, is a significant win for India particularly because the Government seems serious about wanting the country to break into the top-50 list of countries in terms of ease of doing business in the next two years. The climb up the list thus far has been achieved largely by going after the low-hanging fruit; to move up further, a lot more needs to be done before 2019.