Ease Doing Business to Revive Make in India?

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The Government's pet project - Make In India - hasn't quite had the desired effect of spurring investment and ramping up manufacturing in India. One of the prime reasons for the lower than expected response is India's abysmal ranking in the World Bank's Doing Business survey.

India ranks 130th out of 190 nations in the survey which ranks countries based on the ease of doing business. In contrast, China ranked 84^th, while Pakistan stood 138^th.

The low ranking has evidently dissuaded foreign investment and reduced the scope for spurring growth in the country's manufacturing sector.

However, things might change for the better as soon as next year. The government has recognized the need to increase to ease of doing business in India.

According to an output-outcome framework document prepared by the government, India wants to reach the 90th rank in 2017-18 and 30th by 2020.

This certainly is an ambitious goal, but the government believes it to be feasible.

The Department of Industrial Policy and Promotion, asserts India can do well in five categories: starting a business, construction permits, paying taxes, trading across borders, and resolving insolvency.

India is already in the top 50 in three parameters out of ten: protecting minority investors (13^th), getting electricity (26^th) and getting credit (44^th), among the 190 countries surveyed.

However, significant improvement is required in dealing with construction permits and paying taxes where India was placed 185th and 172nd respectively, last year.

India has an uphill task if it wants to improve its ranking, and subsequently its image in the business community. To make any significant progress in the World Bank rankings, India needs to take care of infrastructural and policy issues, and focus on cutting red tape.

On the dispute resolution front, India needs to set up fast-track commercial courts, dispose of cases quickly with minimum adjournments and establish e-courts for electronic filing of complaints, summons, and payments.

The government has to proactively pursue with state governments and local bodies as well as the Supreme Court and High Courts for the necessary reforms.

The Finance Minister's budget proposals were a step in the right direction. In his budget speech, Arun Jaitley announced legislative reforms to simplify, rationalize, and amalgamate existing labour laws into four codes - wages, social security and welfare, industrial relations, and safety and working conditions.

He also said a road map for scrapping the Foreign Investment Promotion Board (FIPB) that scrutinizes foreign investment proposals will be announced soon as part of the government's financial sector reforms.

The implementation of GST, set to roll out from 1 July 2017, will go a long way in improving the country's tax regime and brining in transparency, significantly improving business sentiment.

In addition to this, the government has plotted an eight-point strategy to make it easier to do business in India. Departments will now hold stakeholder consultations for feedback on reforms undertaken, and also engage with respondents to ensure the reforms are implemented at the ground level.

All in all, the current progress seems encouraging. However, India needs to do a lot more if it plans to achieve the targeted 30th rank within the next 3 years. If India has to emerge as a prime destination to do business in, the pace and quantum of reforms needs to go up a lot.

As India's rankings pick up, it will also mean higher foreign investment inflows. This can act as a catalyst and help revive the Make in India project.

We will keep you posted about developments in this space.

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