China's performance in ease of doing biz rankings should inspire India

Cracking the ease of doing biz code should be accompanied with efforts to do better than other countries

The World Bank has released its Doing Business 2019 report, which shows that India has done quite well in terms of notching up a healthy score as well as significantly improving its rank. India’s Ease of Doing Business (EoDB) rank has gone up to 77, compared to 100 shown in the previous year’s report. India’s EoDB score, which captures its progress under 10 broad parameters, has also seen an increase of 6.63 points. The Indian government has underlined the need for cracking the code that is used by the World Bank to determine the rankings of the 190-odd countries under its annual survey.

Ignore for a moment the apparent illogicality of countries like Rwanda or Azerbaijan getting a rank higher than that of China and also accept the Indian assertion that it has to understand what specific changes in policies and procedures need to be undertaken to gain higher EoDB rankings. Even after taking all that into account, a more useful exercise will be to examine how several other countries have also managed to crack the code to get better rankings under EoDB. That comparative exercise would put India’s performance in perspective.

First, the broad numbers. There are four countries that have improved their score by a margin higher than what India notched up in the latest report. Two of these countries are ranked below India and these are Afghanistan and Djibouti. Afghanistan improved its score by 10.64 points and went up from a rank of 183 to 167, while Djibouti increased its EoDB score by 8.87 points and, therefore, went up in the rankings from 154 to 99.

But why worry about countries that are below India? Look at Azerbaijan, whose score has gone up by 7.1 points in one year and the ranking improved from 57 to 25. The fourth country that has done better than India in EoDB scores is China — it improved its score by 8.64 points and its rank moved up from 78 in the previous report to 46 now. Improving scores when you already enjoy a rank below 100 is a more difficult proposition. Azerbaijan and China should, therefore be a lesson for India. They should also be an inspiration as India can actually strive towards repeating what they have achieved this year. In particular, China moved up from 78 to 46 in one year. Can India, with its current rank at 77, emulate China next year?

Other than China, among the BRICS countries, India has done much better in terms of improving scores. Brazil improved its score by only 2.96 points to go up from a rank of 125 to 109 and South Africa gained only 1.37 points in its score to retain its rank at 82. Russia made a marginal improvement in its score by 0.61 point to improve its rank from 35 to 32. Performance by other countries explains why Russia improved its rank in spite of a relatively low increase in its score and South Africa stayed at its earlier rank in spite of improving its score by 1.37 points.

For India, which is ahead of all South Asian countries, cracking the code should require the government to focus on all the 10 parameters of doing business — procedures for starting a business, issuance of construction permits, providing electricity, disbursal of credit, paying taxes, trading across borders, registration of property, protecting minority investors, enforcing contracts and resolving insolvency. It has done well this year only on five of these parameters.

The biggest gain has come in the areas of issuing construction permits (from a ranking of 181 to 52) and trading across borders (from a rank of 146 to 80). There have been improvements in ranks with respect to procedures for starting business (156 to 137), providing credit (from 29 to 22) and getting electricity (from 29 to 24), but these improvements are not very significant and the government has to be watchful next year. This is because the rankings might deteriorate in spite of continuing to do well in these areas as other countries may make bigger improvements.

There are concerns over payment of taxes, registration of property, protecting minority investors, enforcing contracts and resolving insolvency, as India’s rank has declined in each of these areas, in spite of having made some improvements in tax payment systems and resolving insolvency. Perhaps the benefits from steps taken with regard to the streamlined payment systems under the goods and services tax regime and the resolution of insolvency cases under the Insolvency and Bankruptcy Code would flow in next year. But India cannot rest on its laurels. The EoDB rankings are not just about a country’s performance, but about how well it has done compared with others. Cracking the code therefore has to be accompanied with efforts to do better than other countries.