Becoming more business-friendly

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The Government is determined to ease doing business in India. Therefore, all the topics covered in the World Bank report needs intense deliberations, which involve accelerating reforms and adopting innovative approaches

It was encouraging to hear from World Bank President Jim Yong Kim, who spoke at the Vibrant Gujarat Summit. Mr Kim said that the Indian economy is likely to grow at 6.4 per cent this year and even faster in 2016 because of the development measures and structural changes initiated by the Government. He mentioned that the proposed act, to streamline Goods and Services Tax, would ease, doing business in India.

However, a recent report, released by the Word Bank, on ‘Doing Business 2015’, states that the country’s ‘ease of doing business’ rank has further declined to 142 from 140 in 2014. In 2014, before making the adjustments, India was at the 134th position, three positions lower than in the 2013 report.

As the World Bank report takes into account data only as of June 2014, the impact of the initiatives of the present Government will be truly reflected only in next year’s report.

Besides, based on the World Bank’s International Comparison Program data, India had replaced Japan in 2014 as the world’s third largest economy in terms of purchasing power parity, holding 6.4 per cent share of the global gross domestic product on a PPP basis, after the US, and China.

The report covers 10 critical topics with total ranking and individual ranking of the topics. The topics were studied and compared on basis of the total number of procedures to be completed with respect to each of the critical topic along with the time taken to complete and associated costs to arrive at the comparative position.

The ease of doing business rank thus, helps policy makers to understand the overall position of the economy as well as the distance it has to travel to reach the best place in the relevant area.

The report thus, enables the Governments, to look at the critical indicators with respect to the key topics with important procedures with cost and time factor so that they can take appropriate measures to improve their position matching and comparing with the benchmarked practices in the similar region, in Organisation for Economic Cooperation and Development developed countries and the rest of the regions in the world.

The report applies both quantitative and qualitative parameters to measure the county’s business environment to arrive at its overall and individual topic ranking.

Out of the 10 topics that have been analysed in the report, with reference to the previous year, India has improved only in protecting minority investors. Of the remaining nine topics, in one of the topic — enforcing contracts — India’s rank is the same but in the remaining eight, India’s rankings have worsened. 

Doing business not only gives a comparative picture of 189 economies, but also ranks them on basis of quantitative indicators on business regulations and protection of property rights.

The study, helps the planners to fix the root cause for adverse comparative position to achieve the desired outcome by finding out reforms which have worked and where, when, why and how. It has of course, not covered all the factors that are important to business including an economy’s proximity to large markets, level of infrastructural development, factors like security of property, transparency in Government procurement and some of the macroeconomic conditions.

Nevertheless, the comparative position showcases a country’s achievement in critical topics when compared to its earlier ranking, and helps understand best practices in the comparable countries and in other regions including the benchmarked practices in the OECD developed countries.

The idea is to help the Government to evaluate the present state of affairs with varied impediments in easing doing business in the economy, identify the root causes to be addressed while designing policy formulation and business regulatory reforms.

Taxation is one of the serious concerns for investors in India. Central and States direct and indirect tax laws, their interpretations and implementation issues are complex and cumbersome. The challenges before the policymakers are not so easy, like reforming domestic tax laws in alignment with best international practices, tax treaties and arrangements, addressing international tax avoidance, the existence and impact of tax havens and other low-tax jurisdictions.

As the Government is determined to ease doing business in India, all the topics covered in the report needs intense deliberations involving the stakeholders review to take continuous policy interventions, accelerating reforms and adopting innovative approaches to improve the ranking.

While reducing all unwarranted procedures, time lag for various clearances and the cost factor, specific attention must be given to what is appropriate for the country’s economic priority to take India along the accelerated trajectory of growth to become one of the fastest growing economies in the world. A high ranking in doing business is possible only when the regulatory environment in the country is conducive for investment in business.

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