The central government is celebrating the jump in ‘ease of doing business’ ranking of the World Bank’s ‘doing business’ report by 65 places in 4 years under prime minister Narendra Modi. Going from 142nd place to 77th in ranking should enthuse all Indians. Finance minister Arun Jaitley referred to significant economic reforms as reasons for persuading the global investment community to recognise the changing business environment in the country. Ease of starting a business, construction permits, getting power, accessing credit, paying taxes, trade across borders, enforcing contracts and resolving insolvency are some areas where India seems to have made notable progress. This has been recognised in the World Bank report even if the Indian opposition vetoes the very policies.
Rising in the rankings on the ease of doing business front has its obvious advantages and provides a certificate for a country’s commitment to economic reforms. New Zealand, Singapore, Hong Kong and Denmark have consistently kept their ‘ease of doing business’ rankings in the first 10 places thereby becoming the obvious choice for investors to set up businesses there. When India broke into the first 100, two years back, celebrations and congratulatory backslapping began in the treasury circles. But, it was prime minister Modi who set a fresh target of breaking into the top 50 group.
All stakeholders will have to work with unity of purpose to make India the top destination for investments, businesses and thereby create huge work opportunities for millions of qualified and skilled youth. This would be the true reality check for the economy. India may have gone up in the World Bank ranking index. But, unless it translates into both domestic and foreign investments, the ranking will not make sense. Indeed, several Indian business houses may like to differ with the healthy rankings assigned to India and they would have credible reason for this. How is it that the ‘make in India’ campaign has just managed to post modest results in terms of foreign direct investment inflows. It must also be remembered that inflows into bourses and services can’t be the same as foreign firms setting up base here, making long-term commitment and generating jobs.
The pullout of foreign investments from the stock markets in the last few weeks serves as a grim reminder that ‘hot money’ was susceptible to sentiment and speculation. The spike in the ‘ease of doing business’ ranking notwithstanding, there’s no visible enthusiasm amongst domestic investment community and businesses to make fresh commitments in either expansions or green field projects. In fact, domestic businesses have made these commitments abroad where they have been accorded a red carpet welcome. This is one area that the government may like to work on for long-term sustainability of its economic and industrial growth. Unless domestic investors come around giving up their apprehensions on red tape and political witch-hunt, income tax raids and support growth back home, jump in ‘ease of doing business’ rankings will not mean much.
For long, India had clamoured for better sovereign rating from agencies like Standard & Poor’s and Morgan Stanley disregarding the flaws in their models. While there is a big kick in getting better rating, unless inclusive growth happens on the ground, it would not mean very little for the people. Similarly, unless domestic and foreign investment flows happen, capitalising on better ratings, this mojo in government circles is bound to be short-lived.