‘Ease of doing Business’ for Domestic Investors too

Dr Ashwani Mahajan
World Bank publishes its Business Ranking Report on ranking of different countries, periodically, with respect to ‘Ease of Doing Business’ in these respective countries. According to this report published on October 31, 2017, India has jumped from 130th position last year to 100th position this year among 190 countries. It’s obvious that the present Modi government is patting its back for this achievement. The government, which had been facing the wrath of the opposition, post demonetisation and GST, for what they call ‘deterioration’ in the economy, this report comes as a big relief. It’s notable that the economy has been passing through a difficult phase due to slowing down of both GDP and investment growth in the past couple of quarters. It is being claimed that jump in ‘Ease of Doing Business’ ranking, economy may improve as the nation would attract more foreign investment. Some people also believe that it would improve business climate for domestic investment as well.
What are the criteria of ‘Ease of Doing Business’?
World Bank ranks 190 countries with respect to ‘Ease of Doing Business’ on the basis of 10 criterions.  These criterions includes ease of starting a business, ease of closing of business in the event of loss and bankruptcy, ease of getting credit, ease of paying taxes, ease of trade across borders, ease of implementing the contract, ease of getting permission of construction, ease of getting electricity connection, ease of getting property registered and protection of investors. World Bank has reported that India has done better in terms of at least six criterions as compared to the last year and as a result it jumps from 130th position last year to 100th position this year. It’s is notable that India was at 142nd position in 2014.
This improvement in ‘Ease of Doing Business’ ranking is not by fluke. Present government has been very conscious of these criterions and has been working on bringing improvement at all levels. According to the tweets of the Prime Minister Office this improvement in ranking is historic and depicts the government’s commitment towards reform, perform and transform. This not only is a big leap forward in terms of nations ranking, India has emerged as the only country amongst South Asia and BRICS countries to have achieved improvement in ‘Ease of Doing Business’ ranking. Report also underlines the structural reforms brought about by India in the last year.
Experts believe that there are many reforms which this government has already undertaken, such as recapitalisation of banks, introduction of GST etc., however, they have not been included in the present report. These reforms and many others, which are in the pipeline may further improve country’s position in ‘Ease of Doing Business’ and we can soon achieve 50th rank in the ‘Ease of Doing Business’ in the near future. This would really be a remarkable achievement. The World Bank has reported this jump in ‘Ease of Doing Business’ ranking after taking into consideration various reforms including this raking may improve further next year with implementation of many other facilities, easier processes for getting sanction for construction in Mumbai and Delhi, ease in getting credit, ease in trade across borders, ease in depositing taxes and other official charges and successful implementation of Bankruptcy and Insolvency code, 2016.
‘Ease of Doing Business’ for Domestic Investors Too
Generally, World Bank’s focus on ‘Ease of Doing Business’ is foreign investment centric. Therefore, international ranking agencies link ranking of the country with ‘Ease of Doing Business’ ranking. This is true that foreign investors keep an eye on the ‘Ease of Doing Business’ ranking, however, this is equally true that India had been one of the most sought after country for foreign investors, despite being at much lower position in terms of ‘Ease of Doing Business’. This is primarily due to the fact that they are attracted by huge Indian market.
We cannot and should not underestimate the importance of domestic investment while facilitating foreign investors. It is notable that in 2015-16, when the country recorded gross capital formation of Rs. 45,59,318 crores, the contribution of foreign investment was only Rs. 294258 crores. That is, the share of foreign investment was hardly 6.4 percent of gross capital formation and only 2.36 percent of GDP. We should understand that domestic investment is much more important than foreign investment. Therefore, we need to take care of ‘Ease of Doing Business’ for domestic investors also. We should prepare ‘Ease of Doing Business’ report for domestic investors as well. Different states should be ranked according to ‘Ease of Doing Business’; and at the same time an index should be prepared about ‘Ease of Doing Business’ in different states. Although, World Bank’s Vice President of the South Asia region of has stated that, this improvement in ‘Ease of Doing Business’ in India would help small and medium industry and employment therein. It is worth noting that, many steps have been taken in India for the success of Prime Minister’s Start-up flagship scheme, which include tax holidays for Start-ups, concession in capital gain taxes, self certification of compliance in labour and environment laws and liberation from Inspector Raj for three years, concession of 80 percent in patent registration fees etc. are many such measures, which are making business easier for start-ups.
We need to take up steps for making business easier for small businesses most urgently, especially with regard to compliance of contracts, ease of paying taxes, freedom from Inspector Raj, ease of getting credit etc. Then only small entrepreneur will feel that business has become easier for them.
(The author is Associate Professor, PGDAV College, University of Delhi)
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