Relevance : GS Paper III
Context
The latest edition of the World Bank’s Doing Business rankings saw India move up by 14 spots in 2019.
Ahead of peers
- India’s ranking on this index has improved by 79 places to 63 in 2019, from 142 in 2014. This is an impressive achievement.
- With this, the country has moved ahead of its Asian peers, notably, Indonesia (73), Vietnam (70), and Bangladesh (168) — countries with whom it is competing to attract firms that are moving out of China.
- India has also been placed on the list of economies with the most notable improvements on this index for the third year in a row.
- Further, this jump in the ranking, while it comes at a time when economic activity has slowed down sharply, moves India closer towards the target of being in the top 50 economies on this index.
Parameters that saw improvement
- Much of India’s performance over the past year can be traced to significant gains made on four parameters, namely, resolving insolvency, dealing with construction permits, trading across borders, and registering property.
- On resolving insolvency, where India has seen the biggest gain this year, its performance has improved on both the time taken for the insolvency process to culminate, which has fallen from 4.3 years to 1.6 years, and on the recovery rate, which has risen from 26.5 to 71.6 cents on the dollar.
Divergence with ground reality
- Since these rankings are based only on the performance of a few select cities, they are unlikely to reflect the ground realities of large swathes of vast economies like India.
- By all accounts, there is a wide divergence in the ease of doing business indicators across states in India.
Way forward
- Much more needs to be done on enforcing contracts, where it ranks 163, and on registering property, where, despite recent improvements (its ranking has improved from 166 in 2018 to 154 in 2019), India’s performance is nothing to write home about.
- Easing compliance costs of GST, and of paying tax in general, will also help improve the country’s ranking on the parameter of paying taxes where it ranks an abysmal 115.
- Expanding the list of cities covered by this report beyond Delhi and Mumbai, to include Kolkata and Bengaluru as well, is a welcome move. As some of the areas which impact these rankings fall under the purview of state governments, this move could incentivise states to step up their reforms.
