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2019-10-25

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Indian Economy
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For an economy starved of good news, the news of a rise in India’s ranking by 14 places to 63 in the World Bank’s Ease of Doing Business 2020 survey is a positive development. India also figures in the top ten most improved countries in the world for the third consecutive year. From being ranked 142 in 2014 to 63 in 2020, it has been a significant upward journey for the country in a rank list that is an important input in the plans of global investors. The latest improvement has come on the back of the implementation of the Insolvency and Bankruptcy Code (IBC). India’s rank has improved from 108 to 52 in the “resolving insolvency” category with the overall recovery rate for lenders moving up from 26.5 cents to 71.6 cents to the dollar according to the World Bank. This is despite the IBC process being bogged down in courts as interested parties attempt to delay eventual resolution that may work against their interests. The reforms in trade procedures and paperwork as a result of India signing the Trade Facilitation Agreement at the World Trade Organisation are beginning to show. The country’s ranking in the “Trading across borders” category jumped 12 places from 80 to 68 signifying the abatement of paperwork in favour of electronic filing of documents and single-window customs procedures. Interestingly, there has been improvement in a parameter that most industrialists would consider as a problem even now: “Dealing with construction permits”. The country’s ranking has improved by 25 places from 52 to 27.

While the improvements are impressive and the rise in overall rankings in the last few years is noteworthy, the fact is that India is still below its competitors for global capital, particularly China, which at rank 31 is one level above France. The country lags in key metrics such as “Starting a business’, “Enforcing contracts” and “Registering property”. It should also be borne in mind that the rankings are based on samples and audits done in Mumbai and Delhi only (the World Bank has said it would be covering Bengaluru and Kolkata too from next year). Starting, running or shutting down a business may be easier in Delhi and Mumbai compared to Coimbatore or Hyderabad where it is probably more difficult. Admittedly, it is not easy to streamline processes across the country given India's federal set up where States have a big say in several parameters that go into the ranking such as securing building permits, land approvals, electricity connections, registering assets etc. Yet, this is the ideal that the country should be striving for. The easier part is now done and rise in rankings from hereon will depend on how much the Centre is able to convince the States to reform their systems.

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