India’s jump, by 14 places, up the World Bank rankings for ‘Ease of Doing Business’ (EoDB) is a welcome development. Getting to 63rd position in the EoDB index of 190 countries is no doubt a good sign. The Narendra Modi government is bound to showcase the improvement in India’s standing over 10 parameters during the last six years as an achievement. But when top ministers go gaga over the rankings freshly released by the World Bank amidst the economic gloom even in this festive season, it is time actually for introspection as to what the EoDB ranking actually means for a large developing country like ours. Truth is, the improvement in the ranking covers just Mumbai and Delhi. Only in the 2020 rankings revamp are Kolkata and Chennai also likely to be covered. Even when all four metropolitan cities are covered, the index will only be partially indicative and will not represent the ease of doing business in all of India. For the index to more truly represent India, it would have to cover at least a dozen cities and towns, because unlike in a Singapore or Hong Kong — city-states high on the EoDB index — the ease of doing business in India varies from one city to another, one state to another as central, state and local laws vary.
Even within the present reckoning of EoDB, breaking into the top 30 ranks of the index, as the government aspires to, requires much work to be done on several fronts. For instance, India is still placed in the bottom 50 ranks on enforceability of commercial contracts. It means that commercial disputes and related transaction costs are huge in India, which puts off investors. Similarly, starting a business continues to be a nightmare in most places around the country. New ventures face several regulatory hurdles. Frequent revisions in power purchase agreements across states is yet another major impediment for businesses.
While the rise on the EoDB index can serve as a marketing tool for India, the proof of the proverbial pudding will lie in whether we are able to draw domestic and foreign investments. If investments don’t materialise, the rankings will hardly matter. What the Modi government should do is to use these rankings to get, say, 10 large investment proposals cleared in a time-bound manner and get them going on the ground quickly. Till the fruits of economic growth and investment reach the society at large, and a large number of jobs become available for Indian workers, skilled and unskilled, the breast-beating and celebrations over EoDB rankings would be premature.
