Ease of getting away with white collar crime
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.
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.)