Skip to main content

Ranking India poor 130th for Ease of Doing Business, World Bank wants urgent steps to drop labour regulations

By Our Representative
The World Bank has created flutter by ranking India 130th for ease of doing business in its latest flagship report, “Doing Business Comparing Business Regulation for Domestic Firms in 190 Economies 2017”. This is in sharp contrast to the Narendra Modi government’s announcement two years ago to “improve” India’s rankings among the top 50 by 2018.
An improvement of just one against the last 2016 report, which saw India jump by 12 ranks, the country’s performance is worst among all the BRICS countries. Brazil, scoring 56.53 on a scale of 100, is ranked 123rd; Russia, scoring 73.19, ranks 40th; India, scoring 55.27, ranks 130th; China, scoring 64.28, ranks 78th; and South Africa, scoring 65.20, ranks 74th.
The only consolation for India is, among the immediate neighbours, Pakistan ranks 144 Pakistan with a score of 51.77 and Bangladesh ranks 176 Bangladesh with a score of 40.84. Interestingly, the other two neighbours – Sri Lanka (score 58.79) and Nepal (score 58.88) – rank better than India, 110th and 107th, respectively.
While agreeing that The Indian government has committed to improving its doing business ranking by steadily implementing reforms across all indicators… on a platform of increasing job creation, mostly through encouraging investment in the manufacturing sector”, the report regrets, India’s labour regulations remain “associated with a number of economic distortions.”
Pointing out that “labour market issues in India are regulated by 45 central government laws and more than 100 state statutes”, the report says, “One of the most controversial laws, the Industrial Dispute Resolution Act (IDA) of 1947, requires factories with more than 100 employees to receive government approval to dismiss workers and close down.”
“Obtaining such approvals entails a lengthy and difficult process and illegal worker dismissals can result in significant fines and a prison sentence. Industrial establishments also have to observe many other laws that regulate every aspect of their operations from the frequency of wall painting to working hours and employee benefits”, the World Bank states.
Insisting that rigid employment regulations have had “lower output, employment and productivity in formal manufacturing than they would have had if their regulations were more flexible”, the World Bank report favours rise of the “informal sector”, in which labour is “contracted”, and there is more flexibility. It believes, the states which have adopted the contractual ways have seen “a larger increase in value added per worker compared to states with more rigid regulation.”
The World Bank believes, “Although Indian labor laws aim to increase employment security and worker welfare, they often have negative impacts by creating incentives to use less labour and encouraging informality and small firm size.” It adds, “Indeed, Indian firms are more capital-intensive relative to the economy’s factor endowments.”
“High labour costs in formal manufacturing have also contributed to India’s specialization in the production and export of capital-intensive and knowledge-intensive goods despite the country’s comparative advantage in low-skilled, labour-intensive manufacturing”, the reports underlines.
Appreciating Government of India announcement about “plans for major reforms to labour regulation”, the report says, “The planned legislative amendments include the consolidation of central labour laws, facilitating the retrenchment and closing down of factories by allowing firms employing less than 300 workers to dismiss them without seeking government approval, and increasing compensation to retrenched workers.”
Among major achievements in ease of doing business, the World Bank report notes how “India has achieved significant reductions in the time and cost to provide electricity connections to businesses”. In Delhi, for instance, the “time needed to connect to electricity was reduced from 138 days in 2013/14 to 45 days in 2015/16. And in the same period, the cost was reduced from 846% of income per capita to 187%.”
Then, the World Bank notes, “India has made paying taxes easier by introducing an electronic system”. In another important change, it adds, “the minimum capital requirement for company incorporation was abolished and the requirement to obtain a certificate to commence business operations was eliminated.”

Comments

TRENDING

Call to support IIM-Bangalore professor, censured for seeking action against Uniliver

Counterview Desk
Sections of the Indian Institute of Managements (IIMs) across India have strongly reacted to the decision to censure Dr Deepak Malghan, a faulty at IIM-Bangalore. Prabhir Vishnu Poruthiyil, who is faculty at IIM-Tiruchirapalli, has sought wider solidarity with Dr Malghan, saying, "The administration has censured Deepak for merely suggesting a meaningful action against Hindustan Unilever for their abysmal environmental record" by “disinviting” it for campus placement.

Actionable programme for 2019 polls amidst lynch mobs, caste violence, hate mongering

Counterview Desk
Reclaiming the Republic, a civil rights network, has released a document prepared under the chairmanship of Justice AP Shah (retired) -- and backed, among others, by Supreme Court advocate Prashant Bhushan, bureaucrat-turned-human rights activist Harsh Mander, economist Prabhat Patnaik, Right to transparency activist Anjali Bhardwaj and social scientist Yogendra Yadav  (click HERE for full list) -- with the "aim" of putting forth policy and legislative reforms needed to “protect” and “strengthen” the Constitutional safeguards for India’s democratic polity.

Noam Chomsky, top scholars ask NRIs to take stand on human rights violations in India

Counterview Desk
Renowned world scholars, including Noam Chomsky, James Petras, Angela Davis, Fredric Jameson, Bruno Latour, Ilan Pappe, Judith Butler, among others, have issued a statement castigating the Narendra Modi government for allegedly creating an environment of fear through arrests, intimidation and violence.

India under Modi "promoted" crony business, protected financial fraudsters, fueled bigotry

By Sandeep* and Rahul Pandey**
Narendra Modi's ascension to power was accompanied with jubilation and expectation. His supporters were expecting an end to era of corruption and initiation of good governance which was described as Achche Din. His party's adherence to idea of nationalism was believed to make India a vibrant country and guide India to be a world leader. He gave the slogan of 'Sabka Saath, Sabka Vikas' conveying that his government was for all.
Corruption The government system is infested with corruption. A minimum of 10% is siphoned off from government schemes and projects, some of which goes back to political party in power and remaining is pocketed by various administrative, executive and political functionaries. This corruption continues and has increased. Now an additional Rashtriya Swayamsewak Sangh (RSS) person working as Official on Special Duty or some equivalent position in every government department also has a share in this booty.
The Narendra M…

Inviting Rajapaksa to India "insult" to 1,40,000 Tamils killed by Sri Lankan army

Counterview Desk
In the context of Sri Lankan opposition leader Mahinda Rajapaksa being invited in India, about 75 human rights activists*, claiming to be concerned about rights violations during the civil war in Sri Lanka, especially in 2009, have joined together to express their dissent through a statement.

A Godse legacy? BJP rulers have "refrained" from calling Gandhi Father of the Nation

By Dr Hari Desai*
What an agony! On one hand, the entire India is celebrating the 150th birth anniversary of Mahatma Gandhi under the leadership of Prime Minister Narendra Modi, but on the other side, so-called Hindu Mahasabha members have been found mock-enacting the killing of the Mahatma and celebrating the murder by distributing sweets!

No aadhaar, no ration? Hard blow by Gujarat govt on poor and marginalized

By Pankti Jog*
Only those who have aadhaar registration and linked it with ration card will get ration from a Public Distribution System (PDS) shop. This decision of the Gujarat government has hit very badly thousands of poor and marginalized communities of Gujarat, especially during the drought year.

Post-advisory, Govt of India appears reluctant to ban e-cigarettes, "harmful" to kids

By Rajiv Shah
Is the Government of India dilly-dallying over the issue of banning e-cigarettes, which have been declared by anti-tobacco activists across the world as providing “an entryway to nicotine addiction”, especially among the kids? It would seem so, if the latest developments are any guide.

Poser to Modi: Why is Gujarat not fulfilling Constitutional obligations to minorities?

Counterview Desk
In an open letter, Mujahid Nafees, convener, Minority Coordination Committee (MCC), a Gujarat-based civil rights organization, has accused Prime Minister Narendra Modi on infringing upon MCC activists’ constitutional right to protest. Nafees says, they had no other demands except that the Gujarat government should move towards fulfilling the constitutional obligations towards minorities and international treaties to which India is a signatory.

World Bank needs a new perspective on development, not just a new president

By Maju Varghese*
The resignation of the World Bank President Jim Yong Kim was an unexpected development given the fact that he had three more years to complete his tenure. Resignations at such a high level after bidding for a second term is unusual which prompts people to think what would have led to the act itself.