Ease-of-doing-business: Is the Modi government on the right track?

By NewsGram Staff Writer

India, one of the lowest ranking nations in World Bank's Ease of Doing business ranking, has further dropped two places to stand at 142nd out of 189 in the latest rankings.

Keeping in mind the tough task that lies ahead of them, the NDA government, under the make-in-India campaign, has initiated several steps in the last few months to make India a business-friendly destination.

In the ten metrics used to measure ease of doing business in the World Bank's 2015 report, covering the period from June 2013 to May 2014 (when the UPA was in power), India came close to the bottom in two categories.It stood a wretched 184th in the category dealing with construction permits, and 186th in enforcing contracts.

On the bright side, India stood 7th, an improvement of 14 places, when it came to protecting minority investors. It is the only category in which India has shown an improvement from 2013, when it was ranked 21 in this category and 140 in the overall ease-of-doing-business.

According to Bernhard Steinruecke, Director General of Indo-German Chamber of Commerce, India has a lot of potential for attracting international businesses but the 'ease-of-doing' business has to be improved. German companies are very optimistic about India and it would be win-win situation for both the countries if only the conditions for business are improved.

"India is setting up Industrial corridors like the Mumbai-Delhi, Chennai-Bengaluru, Chennai-Vizag and Ludhiana-Kolkata. Therefore several countries like Japan, Germany, Britain, France, US and China are keen to set up manufacturing units in those industrial corridors.

But procedural hurdles delayed the process and Modi government has taken the necessary major steps that are expected to bear fruit in the coming months and years," Steinruecke said.

Tax rules are complex all over the world but the retrospective tax brought by the previous UPA government two years back, following the Vodafone tax dispute, caused more harm than good.

NDA government, particularly finance minister Arun Jaitley, has given an assurance that the retrospective tax would not be invoked by his government in future.

Modi government has promised to improve India's ranking to 50th by 2017 from the present 142nd position.

The task is not going to be easy but the Indian Prime Minister has already taken big strides by setting in motion several initiatives in this regard. One such example is the transparent manner in which the coal and the spectrum auction were conducted, filling the coffers of the government with a revenue of over Rs 3 lakh crore.

World Bank President Jim Yong Kim, had said as early as July last year, that India could jump 50 spots by just implementing the Gujarat Model of reforms.

The Confederation of Indian Industry (CII) has already made certain recommendations to the Prime Minister's Office (PMO) on streamlining investment approvals and provision of utilities, including an appropriate labour development ecosystem.

The government has already moved on several issues and many states have initiated labour laws reforms. The union government is also moving towards allowing unviable companies with up to 300 employees, to close down without permission.

Prime Minister Modi's pragmatic governance approach has ensured that approvals for over 400 projects with investments over $70 billion have been expedited.

More than 30 Groups of Ministers (GoMs) and empowered GoMs (EGoMs), set up by the previous United Progressive Alliance (UPA) government, have been removed as an administrative reform to tackle cross-jurisdictional issues involving more than one ministry.

These GoMs and EGoMs slowed down decision-making considerably. Administrative aspects of such issues are now tackled by Cabinet Secretariat, resulting in speeding-up of project clearance. Issues related to policy aspects are now dealt with by the PMO.

Another significant decision taken by the Modi government was to replace the Planning Commission, created in 1950, with a think-tank of experts drawn from public and private sectors – one that is better aligned to meeting 21st century requirements.

These are some of the positive steps taken by the government to improve India's ease-of-doing business ranking. Whether the measures are sufficient to get the Indian economy back on the high growth trajectory of 8-9 per cent annually, remains to be seen.