Shortly after coming to power, Prime Minister Narendra Modi had set a target for India to enter the top 50 in the World Bank’s ease of doing business rankings by 2018. The scorecard, however, is full of red marks — since 2014, India has moved from 142 to 131 and to 130 this year, and continues to trail its BRICS peers. Worse, according to the study, doing business is easier in Lebanon, Nicaragua, Tajikistan and Cabo Verde than in India. In fact, India could have slid in the rankings but for the jump from 51 to 26 in “getting electricity”. The disconcerting point is that India’s rankings have slid in five of the 10 segments considered by the Bank — starting a business, dealing with construction permits, getting credit, protecting minority investors and resolving insolvency.
In her response, Commerce Minister Nirmala Sitharaman has said the government feels “motivated” to work towards meeting the prime minister’s realistic target and that the World Bank did not consider a few critical reforms steps that have been undertaken after the June 1 deadline set by the Doing Business report. And the World Bank has assured the government that ongoing initiatives – the bankruptcy law, transparency through auction of natural resources, online processes in tax compliance, the potential of the goods and services tax – will be considered in the future. There is some merit in this line of thinking, but it still does not explain why it is still easier to start a business in Swaziland, Botswana, Gabon, Malawi and Cameron. Or, why with a ranking of 172, India trails Congo, Papua New Guinea and Benin in enforcement of contracts. South Sudan, which became a country in 2011, ranks 73 — roughly 100 spots above India. In paying taxes and trading across borders, India ranks 172 and 143, respectively.
What is happening in the states is not a pretty picture either. In September last year, the government had unveiled a report, titled “Assessment of State Implementation of Business Reforms”, which was the first ever ranking of Indian states based on levels of compliance to the 98-point action plan under the “Make in India” initiative started in 2014. The results were disappointing: Between January and June 2015, the period under consideration, not a single state had achieved even 75 per cent implementation. Worse still, 25 out of the 32 states and Union Territories failed to even accomplish 50 per cent of the regulatory set-up required. The worst performers included some of the biggest and most populous states, such as Uttar Pradesh, Bihar and Maharashtra, further underscoring the demographic challenge. In “getting electricity”, for example, where India has improved the most, the fact is that this is based on data only for Delhi. If the entire country was considered, the top 50 target set by the prime minister would have looked even more remote.
By 2020, India will have 900 million people in the working age group, with an average age of 29 years. It is abundantly clear that employment for such large numbers can only be generated if private entrepreneurs are convinced it is worth doing business in India. Instead of desperately hoping for an unexpected bounty in next year’s World Bank report, Indian officials would do well to give up their ticking-the-box approach and get real.