Running to stand still

As proof of its commitment to economic renewal, the Narendra Modi government had set itself the target of breaking into the top 50 in the >World Bank’s annual ranking of countries on ease of starting and operating a for-profit enterprise . That the Bank in its Doing Business 2017 report now ranks India 130 among 190 countries, just one notch higher than last year, is therefore likely to be taken as a signal of the snail’s pace of economic reform. This too when competition is hotting up. Seventy-five per cent of the 283 reforms reported this year were carried out by the developing economies, and the world’s ten best improvers include Pakistan, Kazakhstan, Serbia, Kenya and Indonesia. The report notes that the BJP-led government was elected in 2014 “on a platform of increasing job creation, mostly through encouraging investment in the manufacturing sector.” While it has left out labour regulations from this year’s index, the Bank acknowledges India’s gains in simplifying tax payments, trade procedures and contract enforcement (though it still ranks a low 172 on this front). Most heartening is that India is now the 26th easiest place to get an electricity connection, up 25 places from last year. The average time taken to get a connection has come down from 138 days in 2013-14 to 45 days in 2015-16. Besides, transformative changes such as the proposed Goods and Services Tax and insolvency and bankruptcy norms, if implemented by June next year, could propel India higher in the Bank’s next report.

For its part, the government has argued that the Bank only focusses on two big cities while reforms are happening across States. But that, in fact, frames a larger problem because with an eye on the index officials had focussed on simpler procedures in Mumbai and Delhi. By May this year, an e-biz platform allowed investors to apply for 20 Central government services online, along with two services in Delhi and 14 each in Odisha and Andhra Pradesh. In Maharashtra, a $5-billion investment announced by Foxconn remains on paper. Other BJP-run States had, in fact, not signed up. Certainly, investment (and job creation) are not driven by rankings alone. In his first year in office, the Prime Minister had assured investors that the government had no business being in business, retrospective taxes would be relegated to history and land acquisition norms simplified. There is little movement on the first, and the third has become history. Old retrospective tax demands linger, while new instances (pertaining to bonus payments and mining royalties) are being battled in the courts. Losing its credibility with global capital should be a far bigger worry for the government than a World Bank endorsement.