India jumped 30 places on the World Bank’s Doing Business rankings as Prime Minister Narendra Modi’s efforts to ease norms and push through reforms start to pay off.
“India stands out this year as one of the 10 economies that improved the most in the areas measured by doing business,” the World Bank’s Doing Business 2018 report said. India has been ranked at 100, up from 130 last year, among the 190 economies assessed on various parameters.
The improvement came as India implemented reforms or eased rules for construction permits, landing credit, protecting minority investors, paying taxes, cross-border trade and resolving insolvency. “One-time event such as demonetisation, which is particular only to India, was not taken into consideration,” Annette Dixon, vice-president, South Asia Region at World Bank, said in an interview with BloombergQuint.
With eight reforms making it easier to do business in 2016/17, India was the only economy in South Asia to join the list of the 10 top improversWorld Bank Doing Business 2018 Report
It was the fifth best jump in rankings for India after Brunei, Thailand, Malawi and Kosovo. Better performance in doing business is associated with lower levels of unemployment and poverty in an economy.
India’s shift to take its compliance systems and processes online also worked in its favour to improve the ease of doing business. The government had expected a jump as they’d “worked very hard”, according to Ramesh Abhishek, secretary at Department of Industrial Policy & Promotion Secretary.
The improved rankings will provide relief to the Modi administration that has been facing criticism after the growth fell to its lowest in three years following last year’s note ban and the so-called poor implementation Goods and Services Tax. The June-quarter GDP data had also triggered concerns about the government’s ability to meet its fiscal targets. That, according to World Bank, may help bring in more reforms.
Evidence shows that an economic crisis creates a stronger motivation for reform than a change of government.World Bank Doing Business 2018 Report
More Work Needed
It’s not all rosy for India though. Getting electricity and registering for property remains a challenge as India saw ranking decline on the two parameters. And even with the improvement, the country ranks 181 out of 190 on construction permits. For cross-border trading and enforcing contracts, India stands at 146 and 164, respectively.
World Bank also cites a study on India that said “inefficient licensing and size restrictions” are causing misallocation of resources and reducing productivity. Indian manufacturing's capacity utilisation at factories has remained weak. That, coupled with the mounting corporate debt, has kept private investments away.
“The study shows that removing these restrictions would boost total factor productivity by an estimated 40-60 percent,” the Doing Business report said.
Watch Finance Minister Arun Jaitley’s press conference on the World Bank’s views.