Wednesday, November 01, 2017

India slips in World Bank ranking on starting business, registering property; overall 30 point jump is from pre-GST data

Ease of doing business ranking: Blue 2018, Red 2017
By Rajiv Shah
Prime Minister Narendra Modi may have tried to extract political capital out of the 30 point jump noted in the World Bank’s latest Ease of Doing Business report, calling the 100th ranking among 190 countries “historic”, a result of what he called “all-round and multi-sectoral reform push of Team India”, but a comparison with the last year’s report suggests there is little cheer about it.
In fact, India’s ranking in what could be considered as perhaps the most important factor for calculating ease of doing business, “starting a business”, has actually slipped by one point, from 155th to 156th. In yet another factor, which could be considered equally significant, "registering property", India’s ranking has slipped even more – from 138 to 154.
While the World Bank also notes slip in two other factors, “getting electricity” from 26 to 29 and “trading across borders” from 143 to 146, in a few other factors, the improvement is not as drastic – for instance, the ranking was 185th in “dealing with construction permits” last year, which reached 181st this year, and “enforcing contracts” it was 172nd and has come up to 164th.
Interestingly, the biggest jump in ease of doing business, from 172 to 119, a 50 point jump, is the factor “paying taxes”.
It is, however, not known how the World Bank experts – who depended on their data for the period up to June 2017 – would react to this factor now, as the new tax regime, Goods and Services Tax (GST), began being implemented in India on July 1, 2017. GST is known to be facing all-round opposition from virtually all sections of the business for being implemented in an extremely roughshod manner.
Tax payment analysis is based on pre-GST data 
There is also an improvement in a few other factors – such as “getting credit”, from 44th to 29th, “protecting minority investors” from 13th to 4th, and “resolving solvency”, from 136 to 103.
Interestingly, a comparison between the eight countries covered for the South Asia region – Bhutan, India, Nepal, Sri Lanka, Maldives, Pakistan, Bangladesh and Afghanistan – suggests that, insofar as the factor “starting a business” is concerned, India ranks 8th, worse than even the backward Afghanistan, which ranks 7th.
While overall India is found to be ranking No 2nd in the region (Bhutan is No 1), in “dealing with construction permits” India ranks 7th, as against Pakistan 5th and Bangladesh 4th. Further, India ranks 5th in “enforcing contracts” as against Pakistan’s 4th; 4th in “resolving insolvency” and “trading across border”, 3rd in paying taxes, and 1st in “getting electricity”, “getting credit” and “protecting minority investors”.
Titled “Doing Business 2018: Reforming to Create Jobs”, the new World Bank report praises India for standing out this year “as one of the 10 economies that improved the most in the areas measured by Doing Business”, other countries being Brunei Darussalam, Thailand, Malawi, Kosovo, Uzbekistan, Zambia, Nigeria, Djibouti and El Salvador.
Even as pointing out that India is among the “top improvers”, along with Brunei Darussalam and Thailand, for implementing “the highest number of business regulation reforms in 2016/17”, the World Bank does not fail to note “inefficient licensing and size restrictions cause a misallocation of resources, reducing total factor productivity by preventing efficient firms from achieving their optimal scale and allowing inefficient firms to remain in the market.”

1 comment:

Uma Sheth said...

Till now no one bothered about this report - in fact, most people had not even heard of its annual release. That is why it is easy for the government to hoodwink the public - no one bothers to clarify that the report is from July 2016 to June 2017 and therefore the effects of demonitisation and shoddy implementation of GST are not taken into account.

Let us see what happens next year.