Saturday, November 6, 2010

Two Global Indicators: Measuring India’s Performance

Doing Business

Doing Business 2011, a co-publication of the World Bank and the International Finance Corporation, was released earlier this week. As far as India’s position is concerned, nothing significant has altered compared to its ranking in last year’s report. Of a total of 183 countries covered in the report, India ranks 134 (one place above its ranking of 135 in the 2010 report). Even within individual sub-categories against which countries are measured, there has been no significant improvement in India’s performance.

The report indicates two specific areas where reforms in India have been implemented recently:
Starting a business India eased business start-up by establishing an online VAT registration system and replacing the physical stamp previously required with an online version.

Paying taxes India reduced the administrative burden of paying taxes by abolishing the fringe benefit tax and improving electronic payment.
On the other hand, India’s ranking continues to be low when it comes to enforcing contracts, where it is 182 (second from the bottom). This reflects upon the efficiency of the dispute resolution system, which is plagued by delays and costs.

While one may always quarrel with the veracity or even the necessity or relevance of such a report carrying a cross-country analysis, the fact of the matter is that the results do not bode well for India’s continued rise as a leading economic power, as this report suggests.

Human Development

Economic indicators tell us only part of the story. How does increase in business activity and economic progress impact livelihood of people inhabiting a country and affect human development? Coincidentally, this week also witnessed the release of the Human Development Report 2010 by UNDP. Indian ranks 117 out of a total of 169 countries based on human development indicators. On a positive note, India ranks high among countries who have witnessed improvements in HDI over the 1970-2010 period as measured by annual percentage growth rate in per capita GDP. However, this leaves unanswered questions when it comes to non-economic indicators. As the report notes:
India’s deregulation since the early 1990s. India has a long tradition of entrepreneurial activity, with well established business families and networks. Many business families supported the independence movement and were politically aligned with post-independence governments. The extensive regulations during the first few decades after independence restricted corporate activities but did not threaten domestic business interests. The 1990s liberalization removed restrictions on corporate activity and steadily opened the economy to foreign competition—in effect, reducing regulatory burdens in return for greater efficiency. The evidence on business development in new sectors and on entrepreneurs emerging from different socioeconomic groups suggests a new dynamism. But there is intense debate about rising inequality, the need for complementary social actions, and problems with specific aspects of corporate governance and state-business relations.

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