The World Bank’s recently released Ease of Doing Business (EDB) Index where India moved up 14 places to 63rd may have as a short-in-the-arm for the Narendra Modi-led government at the Centre, grappling as it is with an economic slowdown, but it also suggests is that there’s a lot yet to be accomplished. The government, therefore, needs a concerted effort based on fresh set of reforms to make India a dream destination for global investments.
For example, the World Bank has observed that the country needs to do more in areas such as enforcing contracts and registering property where it is a laggard at 163rd and 154th globally. Also, in ease of starting a business, India’s rank rose by just a single place in the latest report. India’s position on ease of ‘paying taxes’ also remains low at 115th.
Ajay Kapur, Director, Operations and Strategy Management, Risers Accelerator, says in an interaction with New Indian Express that the biggest challenge in India is the regulatory environment, which is seen as difficult despite the government’s moves to boost the ease of doing business. “Government processes are tedious, and they end up wasting time when regulations suddenly change. Setting up a business is also a lengthy process and to avail tax exemptions, one has to qualify under set definitions, which few start-ups fulfill. The tax policy, Goods and Services Tax (GST) included, is also not friendly.”
Finance Minister Nirmala Sitharaman did reiterate that efforts will be made to further simplify GST, and expressed hope that it will help in further improving India’s ranking in the World Bank’s EDB index.
Hurdles to Growth
There are other challenges to do business in India. For example, in getting electricity, India’s current rank is 22 from last year’s 25, which is an improvement. Recent schemes to universalize access to power certainly seem to have helped matters. However, state power utilities remain underperforming and underinvested, owing to reckless tariff design in power distribution across the board.
“The challenge in getting electricity connection has only improved from very difficult to difficult. But that doesn’t seem to be sufficient,” Chandrakant Salunkhe, Founder and President, SME Chamber of India told Financial Express Online.
The need of the hour is to help businesses (especially SME/MSMEs) transform their growth by bringing about proactive policy action, universal access to basic resources, application of technology and offering better incentives to businesses for setting up their shops in a specific regions/markets.
“What is important is a level playing field at the ground level and mindset of government officials should be changed to foster these sectors. For instance, the government is not focusing on online systems. And SMEs in different regions still have to knock doors of the government departments particularly for taking NOCs, electric connections, permissions for restaurants etc.,” he told the news website.
Pockets of Improvement
According to the World Bank, among improvements, obtaining permits to build a warehouse now costs 4% of the warehouse value which is down from 5.7% in the last year. Also, there will be greater ease in Importing and exporting for businesses with the setting up of a single electronic platform for trade stakeholders, upgrades to port infrastructure and improvements to electronic submission of documents. However, all these initiatives are still in the pipeline and execution remains the biggest challenge.
India also scores lowly for starting a business, ranking at 136th. Its global rank has only moved just one notch in the past year, and primarily due to the decision to abolish filing fees for the simplified online format for incorporating a company and its memorandum and articles of association. Other countries seem to have done more.
India needs to move faster on the reform front, and promote a culture of entrepreneurship to better attract global savings and investments. George Paul, CEO, MAIT believes, there are a number of areas that the Government needs to focus on and bring about improvement.
“Some of these are better coordination between the Central Government and the State Government in execution of policies and preferably offering a single window to the industry, timely reimbursement of refunds under various schemes and thirdly to stop retrospective claims made on industry on the basis of a changed interpretation of guidelines / laws, particularly where the industry has been transparent in their reporting. These will go a long way in increasing the confidence in the industry.”
Nonetheless, he says that “One of the outstanding achievements is in the area of Customs Clearance Procedures, that we in the Electronics manufacturing Industry have seen. Another area is the ease and improved accessibility for raising issues and discussions to find solutions.”
Even though the index pertains essentially to two jurisdictions, Delhi and Mumbai, and does not gauge the overall national business environment, there is a need to policy-induce much greater EDB to boost entrepreneurship nationally. It would lead to better employment opportunities, higher tax revenue for governments, and also give rise to improved personal income as well.
As Simeon Djankov, Director of Development Economics at The World Bank, said in an interview, “To move up the ladder in the ease of doing business report, India needs fresh set of reforms. The country needs to ask, what it can do to from being in the top 50 to the top 25 economies. And for that the government needs to come up with a new set of priorities for the next four years. I don’t think that exists yet.”