By K Raveendran
Stung by all-round criticism for the poor show of the economy, India’s 30-point jump in the World Bank‘s Ease of Doing Business came as a heaven sent reprieve for the Narendra Modi government in facing up to its detractors. The report was no doubt a major public relations boost for Modi and his economic managers, particularly Arun Jaitley, who literally took full mileage of the endorsement after having been on the receiving end of a blistering attack on his performance as Finance Minister.
As expected, Congress party and its vice president Rahul Gandhi have sought to belittle the recognition as of no consequence, but they do it out of habit and a certain amount of compulsion, which means people buy the argument only at a discount. But unfortunately when it comes to the crux, the real import of the World Bank index is not very far from Rahul’s sarcasm. PR is not just collateral, it is the very essence of the ‘honour’ in question.
These rankings depend on the level of engagement each county manages to achieve with the World Bank representatives and a lot of two-way communication and consultations. It does not really mean that a country ranked below India in the index is much worse in creating conditions for businesses to set up and grow or that a country occupying a higher position is much better than all those who come behind. The index is worked out on the basis of several parameters and weightages and the improvement depends on a combination of factors, some of which may not be as relevant as the others, but still contribute a certain weightage. It is also possible to identify points for immediate attention so that improvement in those areas will get reflected in a higher ranking. A slippage on one count can be more than made up by solid improvement in another, which may, however, be less critical to the overall business environment and yet carries a certain weightage.
The government has itself acknowledged that the higher ranking is the result of a meticulously planned exercise, including consultations with the World Bank officials and working with local and municipal agencies to introduce simple changes that would help improve the assessment. Additionally, government officials managed to convince the World Bank to hold surveys in both Mumbai and Delhi to base their findings on, unlike in the previous year when the results were based on a survey in Mumbai alone.
While it is true that a survey in two cities is more representative in nature than when it is done in one, there is a question that begs for answer: do Delhi and Mumbai really encapsulate the ground realities in the whole of India? Maybe, the metros can produce a typical sampling of the urban business conditions, but they are least representative of the situation prevailing in the rest of India. The question then that follows is how realistic can such an assessment be about the overall business environment in the country.
Prime Minister Narendra Modi had declared that his government would endeavour to put India in the top 50 band in terms of ease of doing business. As the latest rankings have been worked out on the parameters collected on the basis of the cut-off date of July, the index does not reflect the claimed improvements in tax administration brought about by the rollout of GST and related tax system changes. Once these are also taken into account, the ranking would improve further and probably the promised entry into the top 50 club may appear within reach. But is that a big deal really?
A single example will show that it is not. Saudi Arabia, for instance, currently occupies a global ranking of 92 in the Ease of Doing Business index. It also stands second among the most high-income countries within G-20. In fact, in the latest index, it excelled in six out of the 10 points, indicating progress in protecting minority investors, enforcing contracts, starting a business, cross-border trade, registering property and settling bankruptcies. The kingdom also earned praise for facilitating easier payment of taxes through the electronic filing system, ‘reducing the number of hours required to pay taxes from 67 to 47 hours’.
All these sound very good. But who does not know that Saudi Arabia has one of the most archaic legal and business regimes when it comes to business set-ups? The kingdom has probably the most restrictive and monopolist business environment, which does not permit even the most reputed company in the world to operate in the country except through a local agent. The country’s stock market is virtually closed to the outside world and it is only recently that access has been provided on a highly selective basis.
But Saudi Arabia and other Arab countries work strenuously with global multilateral agencies to improve their rankings in these kinds of indexes, because they need these to compensate for their pathetic track record in basic human development parameters, such as human rights, religious tolerance, protection of minorities etc. So they leave no stones unturned to score high rankings wherever possible.
Dubai has a reputation for being one of the most fertile lands for businesses to grow and follows most modern rules and regulations when it comes to ease of doing business. And yet the emirate, which is part of the United Arab Emirates, occupying the 21st position globally in the Ease of Doing Business index, has a most restrictive municipal regulatory regime that clamps down on even a minor alteration in the display of an establishment’s name. It is a different matter that the city is a paradise for the branding professionals, who are allowed to work around the rules. Both ways, the indexes do not necessarily convey the real picture.