Sunday, August 17, 2014

Improving the Ease of Doing Business in India

We have been seeking to track India’s performance in World Bank’s Doing Business rankings for the last few years (with the last one available here). India has not made much progress in recent years on the overall scores, except on a few specific parameters. This has also become a cause of concern for foreign investors.

The Government has now taken cognisance of these issues and the Department of Industrial Policy & Promotion under the Ministry of Commerce and Industry has issued a document titled “Major Initiatives by DIPP on Improving ‘Ease of Doing Business’ in India”. This document contains significant measures in terms of the use of technology, removal of impediments in the licensing process and the creation of single-window clearance mechanisms, especially in areas where licensing is required to establish or carry on a business. Since a number of licensing measures are undertaken by the States, the Ministry has also written to the State Governments to partner with it in ensuring that there is further easing of doing business in the country. The more specific measures are contained in the Ministry’s document linked above.

Given the various concerns expressed by businesses and investors (both domestic and foreign) about government policies for establishing and carrying on businesses as well as in obtaining foreign investment, this is certainly a welcome move. Businesses and investors require clarity and certainty as to policy one way or another, which was lacking in many areas. The Ministry’s document sets the tone for addressing the issues at a macro-level. At the same time, much depends on how these policy level pronouncements are in fact implemented on the ground. But, the intention at least is quite clear now.

While it is useful to raise India’s ranking on the Doing Business lists, that ought to be the means rather than the end. While it is certainly important to improve India’s rankings as they perform the role of indicators as to India’s policy environment for businesses, the policies ought not to be dictated solely by the rankings. Moreover, the rankings may not necessarily be an accurate measure of realities on the ground. On balance, while rankings cannot be ignored altogether, they cannot be taken for granted either as a determinant of government policy on doing business.

For some interesting recent literature on doing busines rankings and indicators, please see an volume titled “Governance by Indicators Global Power through Classification and Rankings” edited by a group of professors from NYU and a paper on Singapore by two of my colleagues.

No comments: