India is among the top 10 performers in improvement in World Bank Ease of Doing business. And it was not possible without the deep reforms undertaken by states on the ground.
The fourth edition of EODB state ranking was unveiled by Union Finance Minister Nirmala Sitharam via video conferencing. In the overall state ranking, Andhra Pradesh has been selected as top performer, followed by Uttar Pradesh and Telangana.
While releasing the report, Finance Minister said due to commitment for reform in centre and states the World looks at India as a good destination for investment.
“Many of our critic would say that one of the strictest Lockdown not with withstanding that, we had very good flow- inflow of FDI and that is because as a destination India with all its states stands out as a non-binding but yet a very good destination for investment.” – Union Finance Minister Nirmala Sitharaman.
While applauding states for reforms undertaken, union commerce and Industry Minister Piyush Goyal said that with co-operation on one hand and competition among states on the other, India will move faster towards 5 trillion-dollar economy by 2024-25.
He also said that India has identified 24 sector products and can act 20 lakh crores manufacturing output in the next 5 years. The government will work on effective implementation of “one district one product” scheme.
“Soon we are unveiling a program wherein every district in the country will be focusing all its energies to expand the outreach of their products of their special products not only to the length and breadth of India, but to the entire world.” – Union Commerce & Industry Minister Piyush Goyal.
On this occasion Minister of State for Commerce and Industry Hardeep Singh Puri said that following PM’s call for Aatma-Nirbhar Bharat post-Covid, India will emerge as competitive and trending destination and assume an assertive role in global supply chain.
The states and the Ease of Doing Business Ranking:
The last rankings we had for the central state Delhi was at number 19 but it has fallen to number 23. We can see Andhra Pradesh and Telangana have done the best- a score of 98.42 and for Andhra Pradesh 98.3. Well, Telangana has technically fallen in rank because last year it was at number 1 and the year before that at number 1 in 2015.
Actually Telangana had shot up from ranked 14 all the way up to number 1 but now after being at number 1 for the last 2 years has gone to number 2. Haryana has actually had a very impressive performance back in 2015 it was actually down to about 13 or 14 and it came up further in 2016 and now we have it at number 3 and last year it simply was a number 6.
Madhya Pradesh also is actually an interesting case because again it was down at number 7 last year it had dropped 4 in 2015 from number three to number 7 and now it’s back up on number four.
But what is also interesting to look at is, Haryana was actually tied on top with Telangana. Then why has this gone down four places? The reason for this is that these rankings as you can see actually include reform evidence and feedback. What the government has changed on this website is that earlier it was only based on the feedback that states were given now the business reform action plan was released in April last year and the governments of each state were given up until October to implement it.
The analysis started in November and states were reporting how well they were complying with this but the interesting thing done this year is that there has been feedback from people. Where the states are actually gone to back to these actual business persons and have taken feedback and that has now been combined for these rankings.
Haryana has gone up. Gujarat which was number one (mind you back in 2015) has gradually gone down and is at number five. Further down we have Chhattisgarh, Madhya Pradesh, Karnataka and Delhi all the way down.
These rankings are based on how well these reforms have been implemented things like ‘transparency’ and were ‘account single window’ taken into account as well as how well they have implemented ‘labour reforms’ and ease of doing business in terms of 12 main reform areas.
What is the Basis of Ranking?
States were ranked on the basis of their performance and implementation of new reforms suggested by the Department for Promotion of Industry and Internal Trade.
187 reform initiatives across 45 business regulatory areas taken into consideration; some of the key areas are:
- Easy access to information
- Paying Taxes
- Obtaining utility permits
- Contract Enforcements
- Labour and Construction permit enablers
- Single-window approval systems and land administrations
The Ground Reality check:
States need to upload evidence for verification.
They need to provide at least 20 respondents from list of users for verification among the 35000 feedbacks received.
State’s performance is “exclusively” linked to user feedback.
Only grounded level and impactful reforms are taken into consideration via feedback.
The Curious & surprising case of Uttar Pradesh’s ranking:
UP has started implementing Business Reform Action plan (BRAP) 2020-21 reforms.
So far implemented 170 reforms out of the suggested 301 reforms.
Uttar Pradesh also commenced to rank its 75 districts in ‘District-wise ease of doing business’
Aims to promote and impart transparency and best practices to business-to-government (B2G) interactive procedure.
Digitalisation played a great role in Uttar Pradesh up ranking and ease of doing business. UP government launched ‘Nivesh Mitra’ e-portal to facilitate various business process. In the last two years 94% of the 2.3 lakhs No Objection Certificates (NOC) applications were processed through the portal.
The Nivesh Mitra portal resolved 985 of 18120 grievances received.
“UP is committed to the call of prime Minister Narendra Modi for Aatmanirbhar Bharat and making all efforts in this regard. UP achieving the second rank in the EoDB rankings is a proof of that.” – Yogi Adityanath, UP Chief Minister.
Some notable Ranks and Numbers:
12th rank – The rank occupied by UP in 2018 Ease of Doing Business.
2nd rank – The rank occupied by UP in 2019 Ease of Doing Business.
3rd Time – It is the state of Andhra Pradesh that has retained its top rank for the third time in a row.
186 Reforms– Out of the listed reforms for states in terms of commerce and industry, only the state of Uttar Pradesh has implemented 186 out of the suggested 187 reforms in the year 2019.
62,286 public response– Once again as a pioneer, UP the only state to receive feedbacks of more than 50,000 investors by the month of July itself.
73% thumbs up– Out of the total users of the e-portal of business ease, 73% users voted it as being ‘satisfactory’ in providing information and related services.
The Controversy surrounding India’s ranking by World Bank and the ground reality of our Government:
The world bank acknowledged that the 2018 and 2020 reports of its famous doing business ranking and index of ease of doing business for 190 countries suffered from data irregularities and that changes in the data were inconsistent with the methodology.
The world bank has suspended these rankings for now this would deal a minor blow to the Indian government. It’s a blow because the government was trumpeting these rankings and the credibility of these rankings are now in tatters but the blow is minor because these rankings do not actually lead to anything concrete such as increased domestic or foreign investments.
But it’s certainly an occasion to remind ourselves three things- First it is a state’s job to usher in ease of doing business not only the Central Government. Two there were flaws in the ranking methodology and three the ground reality hasn’t changed much over the years at all no matter what the rankings were.
When prime minister Mr. Narendra Modi was campaigning to win power before the 2014 elections he promised us development and good governance. He touched a chord in the hearts of millions of entrepreneurs running tiny to very large businesses by talking about how difficult India’s business environment is which he contrasted with stories of how easy it is to do business in Gujarat where he was the chief minister.
But India has a federal structure centre and states divide power and roles states impose the largest number of roadblocks to the path of doing business. The centre has a much smaller role or they are very significant but the number of things that the states can do to harm your business is long term.
There is no way for PM modi to promise an easier business climate without all the states leading the charge the centre’s role. Which would have been limited to enacting central legislation that covers some aspects of doing business such as international trade taxation and insolvency resolution most of the permits and licenses and laws relating to land and labour are in the hands of the states.
PM Modi has ‘apparently’ worked with the states at least where the BJP was in power and created a low friction environment in these states and shown the rest of the country- “look this is how the ease of business should be done and these are the model states not just Gujarat”. But he didn’t do that, not yet.
Showing improvement in an international credible ranking such as the World Banks doing business ranking of course was too good an opportunity to pass up on that this government craves about the sort of publicity that would get globally since 2014.
In fact, India has jumped 79 positions it had a lowly rank of 142 and now it has earned a place among the top 10 improvers for three years in a row between 2018 and 2020. The government has been trumpeting this as a success of its various policies but the fact is that this leap frogging in terms of ranking had nothing to do with ease of doing business.
It firstly owed to very clever and determined effort in exploiting world bank’s methodological weaknesses that had put disproportionate weight emphasis on smaller changes for instance – India’s ranking also shot up because it dropped the need to submit a cancelled cheque with employee profit and fund applications.
It removed the need for traders to submit hard copies of documents and increasing the capacity of online customs payment gateway. These are the things that the government did which allowed them to go very high up in the rank but the government was not just gaming the methodology.
India gained hugely in ranking because the world bank itself changed the methodology and so while the government celebrated India’s rapid rise in rankings the world’s bank’s own chief economist Paul Romer resigned in a bit controversy over changes to the methodology of rankings that the bank did.
There is another organization called Centre for Development which has now recalculated the ranking in a completely different methodology and showed that India’s rank was much more modest than it should in fact the recalculated ranking showed India should have had a higher ranking in the past which is 113 in 2012 instead of much lower 132 and much lower ranking later that is 114 in 2018 instead of 100 instead of 100 which means that between 2012 when the rank was 113 and be in 2018 when the land rank was 114.
These are all recalculated ranks there has been no difference. In reality this is the fact that the business climate had not changed across two regimes was exactly consistent with what we see on the ground among our Government’s many catchy slogans is tourism but despite ranking eighth among 140 countries under cultural resources and business travel, India ranks a low 109 in tourist service infrastructure.
In a study by World Economic Forum the key component of tourism ecosystem is restaurants. If the government was really interested in improving the climate for doing business instead of burnishing its own image by using the world bank rankings it would have noticed for example that a restaurant in India needs up to 15 licenses compared to 4 in Singapore and just 2 in Turkey.
This is according to a report titled an integrated value chain approach to ease of doing business by Pahle India foundation. The list of those 15 licenses that are needed include licenses for health trade environment, fire tourism pollution music liquor wine and beer separately legal metrology police clearance signage, operating timings etc.
Notice that all these are state subjects and some are under municipalities. Each one of these licenses is an opportunity to make money some in the form of extortion in monthly instalments. Some like tax twisting, etc.
Among the actual small businessmen and industrialists there is a lack of confidence that have gone beyond ease of doing business and come to a stage where the government has to say ‘please come and do the business.’ Now that’s not a very ringing endorsement of the much boasted ‘Ease of doing Business’ that our Nation’s Government has been blowing trumpets about.