Ease of get­ting away with white col­lar crime

The Hindu Business Line - - MARKET WATCH - J MULRAJ

This gov­ern­ment needs to be com­pli­mented for a sig­nif­i­cant im­prove­ment, over the last two years, in the World Bank’s ‘Ease of Do­ing Busi­ness’ rank­ing. In­dia’s rank­ing, which was a dis­mal 142 out of 189 coun­tries in 2015, has shot up to 77 now. In two cri­te­ria, there have been sig­nif­i­cant im­prove­ments. In ‘Trad­ing Across Borders’ In­dia’s rank has risen to 80 from 146 last year, and in ‘Deal­ing with Con­struc­tion Per­mits’ to 52 from 181.

Yet, like Robert Frost said, we have miles to go be­fore we sleep. In­dia’s two worst rank­ings are ‘Reg­is­ter­ing Prop­erty’ and ‘En­forc­ing Con­tracts’. It must con­cen­trate its ef­forts on im­prov­ing th­ese two.

The re­spon­si­bil­ity for a proper regis­tra­tion of prop­erty vests with the State gov­ern­ments. Since a lot of tax­e­vaded money has been in­vested in prop­erty, it is con­ve­nient for the evaders that land/prop­erty records are fudgy and can be (as they are) doc­tored.

The re­spon­si­bil­ity of en­forc­ing con­tracts vests with the ju­di­ciary which, for strange rea­sons, gives a lot of lee­way to white col­lar crim­i­nals.

En­forc­ing con­tracts

It is of no use if In­dia reaches Num­ber One rank in other pa­ram­e­ters of ease of do­ing busi­ness if con­tracts can­not be en­forced. Be­cause, af­ter an en­tre­pre­neur makes an in­vest­ment, if he can­not en­force con­tracts (such as, for sale), then he is locked in and, like in Ho­tel Cal­i­for­nia, he can check out any time he likes, but he can never leave. So, un­less con­tracts are made en­force­able, and within a time­frame, a higher ease of do­ing busi­ness rank­ing will not trans­late to higher FDI or even more FPI in­vest­ment.

Non-en­force­abil­ity of con­tracts arises from var­i­ous fac­tors. Ju­di­cial de­lays are well known, and the lee­way granted, un­be­com­ingly, to lawyers of white col­lar crim­i­nals, to de­lay, ad nau­seum, the hear­ings, through un­lim­ited ad­journ­ments, is proof of the ease of white col­lar crimes go­ing un­pun­ished. But added to that is the ease of get­ting law en­force­ment agen­cies to mud­dle up a case. Last week, a UK court dis­missed charges brought by the CBI against an­other fugi­tive who ab­sconded with pro­ceeds of crime, sim­ply be­cause the case was pre­sented poorly. This can also hap­pen in other high-pro­file cases such as Vijay Mallya, Ni­rav Modi or Me­hul Choksi.

So, if both the ju­di­ciary as well as the in­ves­tiga­tive agen­cies treat white col­lar crim­i­nals with kid gloves, do we need to be ec­static about the im­proved ease of do­ing busi­ness rank­ing? The gov­ern­ment needs to get both th­ese sys­tems in place if it is se­ri­ous about at­tract­ing for­eign di­rect, or in­di­rect (port­fo­lio), in­vest­ment.

And there is a re­port on the rift be­tween the top two guys of CBI with a West Ben­gal con­nec­tion. It seems that a ₹25,000-crore Ponzi scam, in which some of the se­nior TMC peo­ple were in­volved, was be­ing probed by one of the two CBI guys. This sug­gests that jus­tice comes sec­ond to po­lit­i­cal pres­sures, which is not the image to be por­trayed for ease of do­ing busi­ness.

US mid-term polls

Last week, the Democrats re­gained con­trol of the House of Rep­re­sen­ta­tives in US midterm elec­tions, though the Repub­li­cans re­tained con­trol over the Se­nate. The di­vided house would lead to leg­isla­tive un­cer­tainty and slow­down; laws need to be passed by both houses.

Un­cer­tainty will also man­i­fest it­self in elec­tions to five States in In­dia in No­vem­ber/ De­cem­ber, and the gen­eral elec­tions by May 2019. Stock mar­kets de­test un­cer­tainty.

(The writer is In­dia Head — Fi­nance Asia/Hay­mar­ket. The views are per­sonal.)

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