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Saturday, February 24, 2024

Bharat jumps a massive 65 Spots in ‘Ease of Doing Business’ ranking since 2014; During UPA-2, it had fallen 8 spots

Even the most fervent of Narendra Modi supporters thought it was a tall order. In 2014, PM Modi announced a goal of breaking into the top 50 of the World Bank ‘Ease of Doing Business’ rankings, a huge leap from the 142nd spot (out of 190 nations) Bharat was languishing at back then.

This ranking is announced each year in October by the World Bank, and measures a nation’s performance in the corresponding June-May period. The report is based on ten parameters — starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

The measurement criteria are specific with no place for generalities. It is considered an important benchmark with wide acceptability as to how easy or difficult it is to do business in a particular country.

During the five year UPA-II tenure, Bharat witnessed a global ranking 134, 132, 132, 134 and finally 142 – i.e. a net drop of 8 spots across 5 years. And this poor performance reflected on our economy, with investors wary of coming to Bharat and GDP growth slowing to a crawl. Lack of reforms, policy paralysis & massive unchecked corruption at the highest levels further drained all business sentiment and caused a massive bank NPA pile up.

Working in mission mode

Having inherited the legacy of position No.142, NDA started working on each of the criteria in 2014 itself. Policy changes were announced and DIPP (Department of Industrial Policy & Promotion) under Ministry of Commerce & Industry became the nodal agency to drive this project. DIPP in collaboration with the World Bank started conducting an annual reform exercise for all States and UTs under the Business Reform Action Plan (BRAP). States were encouraged to implement the reform agenda and compete with each other to attract investments.

As the adage goes, ‘What cannot be measured cannot be improved’ – DIPP started annual assessment of States in ‘Ease of Doing Business’ based on a combined score consisting of Reform evidence score based on evidences uploaded by the States and UTs and Feedback score that is based on the feedback garnered from the actual users of the services provided to the businesses. Incidentally, in the Ease of Doing Business Ranking of States announced in July this year, the top rankers are Andhra Pradesh, Telangana, Haryana, Jharkhand and Gujarat…all non-Congress governments

As is always the case, there was a time lag between the initiation of the ‘ease of doing business’ reforms and their impact on the ground. After making a smaller improvement of 12 spots in the first two years of the Modi Government, Bharat made a major jump of 30 positions in the third year and a jump of 23 spots in the fourth year to reach position no. 77 – a 65 point improvement in the first four years.

Now, just 27 positions away from the target, the impossible goal of breaking into the top 50 looks plausible.

Where are the reforms?

One of the oft-heard questions posed to the Modi Government’s by self-declared libertarians who claim that the current Government is rooted in socialism and hasn’t done enough to reform and liberalize the economy is – ‘Where are the reforms?’

For these free-market absolutists, the moves of this Government  to create a functioning social safety net for the poor using JAM (Jan Dhan bank accounts + Aadhar + Mobile) and public insurance schemes (life, accident, crop, health) were enough to brand the Government as ‘left of centre’.

But if there were no market reforms, how did the nation jump 65 spots (a historic rise by any standard) in the ‘Ease of Doing Business’ rankings of the World Bank?

One of the biggest reforms of this Government – the Insolvency and Bankruptcy Code which will have far-reaching impact in coming years not just on bankruptcy resolution and bank NPAs but also in creating a culture of accountability – is often ignored by critics, and GST (Goods and Services Tax) is dismissed as a ‘badly implemented tax law’ overlooking the fact that any large-scale tax reform will have some teething troubles.

Other dal-roti improvements like getting electricity, getting credit (MUDRA effect), getting construction permits online, and ending the access-based crony capitalist work culture of Lutyens’ Delhi – don’t find a mention in most of the op-eds chruned out in the pink papers.

Of course, there are many pain points that still remain for the ordinary businessperson in Bharat – as Finance Minister Arun Jaitley himself accepts in this FB post, areas like ‘starting of business’, ‘registration of properties’, ‘enforcement of contracts’, need much improvement both at the level of the Central Government and the State Governments. There is also the question of harassment of SME businesses by tax inspectors & assorted Government functionaries. Our colonial-era bureaucracy and law & order machinery (police + courts) still don’t inspire confidence in the common citizen.

But there is light at the end of the tunnel now. The next time you catch yourself muttering ‘is desh ka kuch nahin ho sakta‘ (nothing will ever change in this country), remind yourself of these rankings and other indicators like fall in infant mortality rate which show a fundamental change is afoot. But we must stay the distance. All of these hard-earned gains will dissipate if we don’t back this Government and allow a repeat of 2004.

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