While India was ranked at the 77th position last year in the global ease of Doing Business rankings, sustained business reforms have helped India jump 14 places to move to 63rd position in this year’s list.
India earned a place amongst the world's top ten improvers for the third consecutive year in the World Bank Group's Doing Business 2020 study. While India was ranked at the 77th position last year in the global ease of Doing Business rankings, sustained business reforms have helped India jump 14 places to move to 63rd position in this year's list. The Machinist believes that this is definitely a commendable achievement and also spoke to some industry leaders to understand their perspective on this improvement.
Noteworthy jump
Anil Verma, Executive Director & President, Godrej & Boyce says, "An improvement of 79 places from 142nd in 2014 to 63rd in 2019 is indeed noteworthy and speaks a great deal about how the government has focused its energies in improving the business environment in the country." Harsha Kadam, CEO & President -Industrial Business, Schaeffler India calls it a welcome news. He says, "To be ranked amongst among the world's top ten improvers for the third consecutive year is a remarkable achievement for our country and is a reflection of the persistent efforts of the government to drive the business reforms agenda, not only at the central level but also at the state level." Abhyuday Jindal, Managing Director, Jindal Stainless, acknowledges the government's push on reforms. "Reforms initiated by the government to create a unified national taxation system in the form of GST, reducing corporate tax, rationalizing FDI rules across the sectors, new bankruptcy law, and a push to digitize all business transactions have reaped benefits. It's a win-win situation for both economy and industry. These reforms have increased transparency levels, which have boosted the confidence of investors and businesses in India. However, the vast untapped potential of the Indian economy will be fully realized once policy enforcement on the ground is implemented in its entirety," he says.
Schaeffler's Kadam also highlights that the jump is a tremendous achievement, especially for an economy that is as large and complex as ours. "The development puts India in the rank of the most-favoured investment destinations, indicating an environment that encourages foreign investors to become part of the Indian growth story. It will also help international companies identify attractive markets for their expansion, looking at alternatives to China for investment amid Beijing's trade war with the US. The focus now needs to be on further improvement in the ease of doing business through additional reforms and policies and aim to rank within 50 in the ranking for the coming years," he explains.
The impact
Jindal believes that this will act as an enabler for budding entrepreneurs to set up new businesses and scale-up the existing ones. "This will hopefully attract domestic and foreign investments, thereby creating fresh employment opportunities. India needs more wealth creators, and as the processes for entrepreneurship in the country eases, the nation will be a US $5 trillion economy as envisioned by the Prime minister," he says.
Kadam of Schaeffler India also feels that the new ranking enhances India's perception as a global business destination and will provide a much-needed thrust to India's GDP growth by attracting foreign investment, boosting the private sector and enhancing the country's overall competitiveness in the global markets.
Verma of Godrej & Boyce believes the improvement will augur well in luring multinational companies towards India as an attractive business destination. "The cost of obtaining all permits and authorization to build a warehouse has now come down and will thus boost investments in the warehouse space. The creation of a single electronic platform for trade stakeholders, upgradation of port infrastructure and improvements in electronic submission of documents will facilitate both imports and exports thereby enhancing foreign trade."
Kadam also points out that the improvement in the rankings is largely due to the government introducing norms to simplify the process of starting a business, better access to construction permits and easier trade across borders through electronic submission of documents for import and export audits. "This has significantly reduced logistics time, making it more efficient. The recent decision in reducing the corporate income tax rate to 22 percent for existing domestic companies and 15 percent for new domestic manufacturing companies also helps India become more competitive compared to other emerging markets," he adds.
Kadam also states that all these factors will collectively help attract foreign investment in the country, particularly at a time when global investors are looking at alternative locations for their manufacturing operations, to counter trade war risks. "Besides, the improvement in rankings should also encourage the start-up ecosystem in the country, thereby driving forward the government's ‘Make in India' scheme," he adds.
The way ahead
Jindal says that the way ahead is faster implementation of the reforms. "In today's dynamic age, we need all arms of the government - administrative, judicial, and legislative - to respond to changing times with agility and work for improved hand holding between industry and government. Further, as global majors resort to protectionism to save their markets, we need our government to ensure a level playing field for domestic players as well. To avoid market distortions by way of predatory pricing, highly subsidized imports, dumping of surplus etc, our systems need to be not just fast and responsive, but often pre-emptive," he says.
Godrej & Boyce's Verma also emphasises on the implementation aspect when he says that it is imperative that ease of doing business which encourages a rule-based environment is practiced in spirit on the ground. "This will largely depend on the state's ability to implement the subscribed rules and regulations. We have to ensure that there are no slips between the cup and the lip," he cautions.
Jindal also has a word of advice for the industry. He says: "The industry would also do well with energy security in a sustainable manner. We also need to enhance India's cost competitiveness in logistics and transportation by bringing our infrastructure at par with the developed economies." "Indian companies should increasingly focus on exports and becoming a part of the global supply chain," adds Verma of Godrej.
Kadam of Schaeffler India also notes that there is much scope to further enhance the ‘Ease of Doing Business' with proactive policy action, such as in the domain of enforcing contracts, registering property and starting a business. "It should then be eminently possible to move into the top 50 of the global Index, and, in the foreseeable future, to the top 30. India needs to move faster on the reform front, to be seen as a more attractive destination for savings and investments. The available data suggests that the resources required for starting a business can be considerably higher in the lower income economies. It would stifle entrepreneurship and risk-taking, and, thereby, discourage profit earning," he believes.
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