Beyond Rankings: Assessing India's Business Environment
Paragraph 1
We have recently been basking in the knowledge that India has fared well in the World Bank’s Ease of Doing Business (EODB) report. Previously rated the worst-performing BRICS economy, India has now become the median economy among BRICS and the best in South Asia. The greatest improvements have been recorded in ‘dealing with construction permits’ where the country jumped 129 places to reach 52, and ‘trading across borders’ where India has moved 66 places to reach 80. However, India slipped in the categories of ‘paying taxes’ and ‘resolving insolvency’. The scope of this EODB index is limited after all and, by the World Bank’s own admission, the indicators are not designed to portray the entire macroeconomic scenario of any country or reflect its growth prospects. While this report is a recognition of the positive steps India has taken, our performance here can only be a function of the parameters laid down by the World Bank. This result cannot be extrapolated as an overall improvement in EODB, on the other important parameters.
Paragraph 2
Policy and regulation remain important factors that must be assessed while measuring the actual EODB. The proposal of retrospective tax was not so long ago and the resultant economic uncertainty should not be forgotten. We also need to deal with the foreign investment reporting format recently instituted by the Reserve Bank of India. This new reporting system is completely contrary to ease of compliance and has served to make foreign investment reporting more confusing and challenging. Similarly, the draft e-commerce policy released last year elicited extensive criticism from across industry.
Paragraph 3
We should pay heed to several other aspects of our business environment, some of which have been making global news. We can only be attractive to innovative industries if we have in place a robust and predictable system for intellectual property protection. We should introspect about consistently being rated poorly in Transparency International’s Corruption Perceptions Index. We should be troubled by our position in the Crony Capitalism Index. We should be concerned with our falling rating in the Press Freedom Index which sees our media independence as compromised. We should worry about the anxiety that has loomed most recently, stemming from air pollution in India’s capital city and the resultant health effects on its hapless residents. Finally, there is no denying the real and widespread apprehension that has resulted from the steady rise of populist right-wing sentiment across India and which has drawn rebuke from international human rights organisations.
Paragraph 4
It is understandable that our policy makers would cite the EODB index as a barometer for how easy it is to conduct business in our country and an indicator of the lack of red tape, cost burden and overall entrepreneurial mobility. Of course, a good rank is expected to translate into a better chance of securing foreign investment and the government expects an even better ranking next year, as the reforms’ benefits are more fully realised.
