The results are yet to kick in

India’s ‘ease of doing business’ ranking does not reflect the true picture

The country’s policymakers got a shock on Tuesday after the International Finance Corporation (IFC) released its Ease of Doing Business rankings for 2017 in Washington. Despite the continuous reform process undertaken by the government, India was placed at 130 among 190 countries, just one notch above last year’s rankings. Even countries like Bhutan, Nepal and Sri Lanka are placed above India. This year New Zealand secured the top slot, replacing Singapore in the ease of doing business index.

Improving its ranking in the Ease of Doing Business index has been one of the focus areas for the Narendra Modi government. In fact, the government aims to be among the top 50 countries in relation to the ease of doing business. In the last few months, the government has undertaken several reform measures, one of the major ones being the bankruptcy code, which built up much expectation for a significant jump in the rankings. The Insolvency and Bankruptcy Code, 2016, approved by Parliament, will replace a string of archaic laws with a modern contemporary law and aid companies to opt for easy exits. Besides, the FDI limits have been liberalised in a host of sectors including defence, civil aviation and pharmaceuticals. The much-awaited goods and services tax (GST) is also set to be introduced by April 2017. Some of these have not been factored in because the report takes into account the data available till June, and thus there is no need for panic.

Understandably, there will be a lag between any reform measure undertaken at the policy level and its implementation on the ground. In any report will reflect this. The report noted that getting an electricity connection has become easier but “starting a business”, “getting credit” and “construction permits” are clearly areas that need to be worked on. Overhauling the Companies Act came in for praise in the report. What the government definitely needs to do now is to focus on the implementation of each of these policy measures and improve the areas that have been identified in the report. The measures need to percolate down to the lowest stratum to make a visible change in the business environment of the country. But this will take some time. Expectations were high especially after India climbed 16 notches on the Global Competitiveness Index, prepared by the World Economic Forum, to touch 39th position. The index was released only last month. In 2014-15, India on the same index ranked 71. Among the BRICS countries, only China remained ahead of us.