India needs to move faster on the reform front, to better attract global savings and investments. The available data suggests that the resources required for starting a business can be considerably higher in the lower income economies. It would stultify entrepreneurship and risk-taking, and, thereby, discourage the earning of profit. We need policies that will induce much greater EDB to boost entrepreneurship nationally.

A perceptible improvement in India’s ranking in the World Bank’s ‘ease of doing business’ (EDB) index is a welcome development. In the midst of a gloomy economic environment, India has continued its upward march in the EDB rankings. With its rank moving up, the country has managed a quantum jump in its relative position over just a fouryear span from the 130th place in 2016 to 77th in 2018 and 63rd in 2020 (among 190 economies).

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Increasingly though, it is becoming difficult to reconcile the ‘all-is-well’ scenario painted by India’s performance in the EDB rankings with the marked deterioration in business sentiment on the ground. India’s latest performance in the EDB rankings comes at a time when its Index of Industrial Production has gone from expansion to contraction, credit flow to industry has all but seized up, and RBI surveys have noted a marked dip in business expectations on order flows and output.

Adi Godrej has said that the improvement in India’s rankings in the ease of doing business index should prompt the Central Government to bring in further reforms. “It is fantastic that India has made strong strides in improving the ease of doing business ~ from Rank 130 in 2016 to 63 in 2020. To be amongst the top 10 improvers for the third year in a row is commendable and speaks volumes about the effort that the Government is putting in to unshackle the economy,” he said.

Reforms in land management and enforcing contracts could be the next big measures through which India can improve its EDB ranking, said the World Bank president, Mr David Malpass. In its latest global report, the World Bank has placed India at 163 and 154 positions respectively in terms of enforcing contracts and registering property. India needs to provide adequate resources to commercial courts at the district level for judgments to flow faster. “Small claims courts are needed to help people enter into contracts which they know can be enforced,” he said. “With regard to land management reforms, digitisation of the land data and making the data readily available throughout India would facilitate the buying and selling of land,” Malpass said. India rose 14 places in the 2019 index, inching closer to its target of being counted as part of the top 50 club.

But, Malpass said, India was on the right track, being among the 10 best-performing economies for three consecutive years. “A country’s competitiveness is partly due to ease of doing business but also due to macroeconomic stability, skills of the workforce and whether investors finally chose to invest there,” the World Bank president has said.

Also, he pitched for the growth of private banks as well as stricter regulations for nonbanking financial companies (NBFC), which he said might entail some risk. World Bank currently has 97 projects with over $24 billion committed in the country and Malpass said existing programmes would continue. Aso, its funding for India might grow by an estimated $5-6 billion annually.

It is notable that while India’s ranking has improved impressively in the last few years, there is much scope to enhance the EDB with proactive policy action, such as in the domain of enforcing contracts, registering property and starting a business. It should then be eminently possible to move up to the top 50 of the global index, and, in the foreseeable future, to the top 30.

For instance, on the ‘getting credit’ parameter, while India has a relative high rank of 25, the fact is that the banking and financial sector faces a rising contagion of risks and requires sustained reform measures to better allocate resources economy-wide. Consider another parameter, ‘getting electricity’, for which India’s current rank is an impressive 22. Recent schemes to universalise access to power certainly seem to have helped matters.

It is glaring that under at least four heads enforcing contracts, registering property, starting a business, and paying taxes,- the scenario has hardly improved, as per the latest scores. For example, for enforcing contracts, India’s rank was 163rd among 190 economies last year. Ditto this year. It implies much time and cost overruns in resolving commercial disputes, which are certainly not conducive for a thriving business environment. The way forward is to carry out long pending reforms of judicial processes to do away with routine legal delays.

Similarly, India still scores very low when it comes to registering property. The figure has barely improved to 154th, which is nothing to write home about. High stamp duty rates seem a perverse incentive to undervalue and under-report real estate transactions. There remains a host of rigidities in housing and real estate that need to be reformed to promptly do away with extensive opacity. India also scores lowly for starting a business, a poor 136th. Its global rank has only moved one notch in the past year, and primarily due to the decision to abolish filing fees for the simplified online format for incorporating a company and its memorandum and articles of association. Other countries seem to have done more.

As regards paying taxes, India’s score has risen somewhat to 115th. But we can, and need to, further simply the indirect goods and services tax (GST) regime, and make taxes, both on income and consumption, easy and taxpayer-friendly. The average time for filing taxes can be significantly higher in lower middle income economies like India.

It is also a fact that India’s high global rank in dealing with construction permits, 27th in the ranking, is more a reflection of recent reform measures in the two mega urban centres, and may not quite hold nationwide. The way ahead is to have reforms in place to better coagulate funds for built spaces. Further, while our rank for resolving insolvency is a credible 52nd, the fact remains that bankruptcy resolution is a chronic headache.

India needs to move faster on the reform front, to better attract global savings and investments. The available data suggests sthat the resources required for starting a business can be considerably higher in the lower income economies. It would stultify entrepreneurship and risk-taking, and, thereby, discourage the earning of profit.. We need policies that will induce much greater EDB to boost entrepreneurship nationally. It would lead to better employment opportunities, higher tax revenue for the government, and also result in improved personal income.