Easing the India growth story

Despite a multitude of reforms, there is still much that can be done to relax barriers to business across India Inc.

The most recent Doing Business Report, an annual undertaking of the World Bank, underlined India’s significant progress on this front with the nation moving up 23 positions to be ranked 77th out of 190 nations on the ease of doing business ranking.

This meteoric rise can be put down to the government’s resolve to take hard decisions that have translated into remarkable progress. In addition to being the fastest growing major economy in the world, India is one of the top five reformers, improving its score in six out of ten criteria used by the World Bank for measuring the ease of doing business. A multitude of initiatives rolled out by the Indian government, such as the recapitalization of banks, insolvency resolution, and simplifying the process of taxes, have cumulatively served to spur on the economy. Given the sheer scale of the challenge at hand, this progress has been nothing short of truly phenomenal.

However, all is not plain sailing. The World Bank’s report has its finger on the pulse of stakeholders in Mumbai and Delhi, but not elsewhere in India. Starting a business in Uttar Pradesh, Bihar, Rajasthan or many more states would doubtlessly weigh India down in the rankings and the Department for Promotion of Industry and Internal Trade (DPIIT) is carrying out a widespread evaluation to understand the true state of doing business across the nation.

India also focused on streamlining business processes, and this can be seen bearing fruit in the fact that it is the only nation (other than Djibouti) to make the list of 10 top improvers for the second consecutive year. On the whole, the BRIC economies improved their average ease of doing business score by a combined total of almost 19 points across various areas of business regulation, passing reforms simplifying the process of trading across borders. But what of trade within India itself? Introduced with the intent of bringing the nation under one tax regime, there remains complexity across business systems even after the introduction of the Goods & Service Tax (GST) regime.

A prime example of this can be seen in the alcobev industry, which remains outside the ambit of GST and continues to be regulated by different regulatory frameworks across 36 different states. Another peculiar trend in the industry is that of the involvement of government in distribution network as a monopoly. State owned wholesale or retail distribution networks are not anti-business in itself. However, this brings about peculiar conundrums of its own, such as long lead times on repayments, a litany of approvals (often needed at as granular as an SKU level), and roundabout import/export procedures. These inevitably lead to delay, creating a domino effect of unviable business practices. Changes are being instituted, but there is a need for wider adoption. West Bengal has introduced extensive e-governance initiatives, with the entire brand registration and operational approval process taken online by the Excise department in a completely transparent and expeditious manner. Maharashtra has done away with recurrent annual brand registration requirements to ease the regulatory burden on the industry.

What then is the panacea? In the current ecosystem, states often cherry pick easy to implement parameters from the 400+ ease of doing business parameters laid out. Hence it’s entirely possible that businesses in any one sector can see little or no improvement in ease of doing business. For sectors that contribute significantly to state government revenues, State governments should adopt a separate sectoral assessment in order to improve economic value add. Furthermore, the reforms being rolled out across India should consider inter-linkages with industries that act as input or serve as markets, which is to say we need to include both downstream & upstream sectors to ensure seamless business environment and true ease of doing business.

There should also be a focus on ensuring existing businesses enjoy the fruits of this drive to ease business across India, which can also be done by updating legacy frameworks to ensure it is still relevant to modern-day business. The ease of doing business rankings serve as a barometer for foreign investors looking to invest in the India growth story, and the India story is an attractive one with still much headroom for growth.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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