India’s reforms bearing fruit
World Bank’s recognition is testimony to efforts to bolster business and economic growth
A MILESTONE was reached last month in India’s efforts at economic reforms when the World Bank released it’s annual Doing Business 2019 report, the 16th edition of the report which investigates the regulations that support or inhibit business activity in 190 economies in the world.
India catapulted from its rank of 100 last year to 77th among economies assessed by the World Bank, a jump of 23 positions in one year.
This was on top of a steady improvement in Ease of Doing Business (EODB) rankings last year when India jumped from a rank of 130 to 100.
India has recorded the highest improvement in two years by any large country since 2011 in the business assessment by improving its rank by 53 positions.
The Doing Business 2019 report ranked countries on 10 specific parameters: processes for business incorporation, getting a building permit, obtaining an electricity connection, transferring property, getting access to credit, protecting minority investors, paying taxes, engaging in international trade, enforcing contracts and resolving insolvency to assess the performance, or the lack of it, among 190 economies in its quest for a business-friendly environment.
On this count, India improved its rank in six out of 11 indicators and moved closer to international best practices (distance to frontier score) on seven out of the 11 indicators.
With regard to granting construction permits, India’s rank improved from 181 last year to 52 this year, an improvement of 129 ranks in a single year while in trading across borders, India’s rank improved by 66 positions moving from 146 to 80. This is the second-consecutive year that India has been recognised by World Bank as one of the top improvers.
The recognition by the World Bank is testimony to the reforms undertaken by India in aligning business practices with the best in the world and giving a thrust to economic growth. It is no surprise that India has been clocking growth rates exceeding 7% on average in the past three years.
The focus on policy-driven governance and predictable transparent policies has led to tangible benefits, such as better gross domestic product growth rates and the jump in World Bank Ease of Doing Business rankings, as well as intangible ones in improved business sentiment and confidence across all levels.
Positive changes in parameters adopted by the World Bank in its EODB rankings impact businesses operating at multiple levels.
While simpler processes for business incorporation or enforcing contracts and resolving insolvency benefit big corporates, small enterprises stand to gain too from the ease of getting electricity connections or building permits.
The positive changes in the business environment have been on the back of sustained institutional reforms which have unleashed a wave of transformative processes across the country.
Pradhan Mantri Jan Dhan Yojana, the world’s biggest financial inclusion initiative, has helped with universal access to banking facilities and thereby also partially capitalising banks that have made lending a more reasonable proposition.
Almost 318 million beneficiaries have been banked with a balance of R162 billion in beneficiary accounts. Launching India Post Payments Bank on September 1 aided the process by leveraging pan-India physical presence of 155 000 post offices to add to banking channels.
The Insolvency and Bankruptcy Code and the Goods and Services Tax, launched in May 2016 and July last year respectively, are perhaps the biggest contributors to India’s jump in EODB rankings. Both are touted as the biggest and the most difficult structural reforms undertaken in India in the recent past.
According to the World Bank, the establishment of debt recovery tribunals in India reduced non-performing loans by 28% and lowered interest rates on larger loans, suggesting that faster processing of debt recovery cases cut the cost of credit.
It has also helped that more than 1 400 archaic laws have been repealed in the past few years. The time taken for the resolution of commercial disputes has gone down drastically – from 1 500 days earlier to 400.
Likewise for clearing imported goods which has gone from 280 hours to 144. Small business can secure a loan of 10 million Indian rupees (R2 million) in less than a minute.
A new industrial policy is in the works, one which will be reflective of realities and in accordance with the needs of entrepreneurs in this time and age.
Attempts are also in place to have districts and provinces compete against one another in the quest to better the business environment across the country.
Transparency through digitisation of processes brought about muchneeded speed and efficiency; the World Bank recognised that India reduced the time and cost to export and import through various initiatives, including the implementation of electronic sealing of containers, the upgrading of port infrastructure and allowing electronic submission of supporting documents with digital signatures.
A jump of 53 positions in Ease of Doing Business rankings in two years is no mean feat.
On Monday, Prime Minister Narendra Modi launched the Ease of Doing Business Grand Challenge to invite innovative ideas based on artificial intelligence, internet of things, big data analytics, blockchain and other cutting-edge technology to reform government processes.
The aim is to meet the challenge of being placed among the top 50 in the rankings. Going by the past milestones, India seems to be on course.