Friday, October 30, 2015

Investor-friendly India? Ha! ha! ha!

For a government overtly committed to shredding red tape to smoothen matters for business, it is a trifle disappointing that India has moved up only four places (not by 12 as reported in a section of the media) in the World Bank’s annual ranking on this count. A ranking of 130 out of 189 countries in terms of ease of doing business is unflattering for an economy that seeks to replace a slowing China (ranked 84) as the preferred destination for investors. Nor is it good news for an economy in which investment has stagnated for four years. Whether it is startups or investment by existing concerns, small or big projects, domestic or foreign capital — we need them all. Yet, India’s (or rather, Mumbai’s and Delhi’s) performance across a range of indicators tells us that except perhaps for being able to secure electricity without breaking into a sweat, there has been virtually no improvement in other parameters over last year. These are: starting a business, dealing with construction permits, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The Modi government has set its sights on breaking into the first 50 in the next three years and has promised changes in income tax procedures, bankruptcy laws and the Companies Act. Add GST to this list, and it may help improve our ranking in contract enforcement (a reflection also of our judicial machinery), where we are placed at an appalling 178. Construction permits remain another area that needs to be addressed, India’s rank being 183. If this is how matters stand in Mumbai and Delhi, it only shows that ‘investor-friendliness’ is a just a slogan in most other parts.
Procedural reforms have been neglected for too long. The Centre should seize the initiative, all the more because such moves are politically non-controversial. It, however, involves taking on vested interests in the bureaucracy, the regulatory hurdles, and sections of industry that have learnt to game the system. Once a momentum is established, States across the political spectrum are likely to act on cue.
However, there is more to improving conditions for business than simplifying procedures. If the OECD countries are at the top of the table, it is because of the maturity of their institutions — social, political and economic. A similar distinction marks out India’s southern and western States from the rest. Long-term investors would prefer a place where the workforce is skilled and healthy and where the government delivers on civic amenities, social and physical infrastructure, and law and order. An issue that does not figure in the report is the need for an ecosystem that spurs innovation and research. As the World Bank’s chief economist Kaushik Basu observes, the debate is not about more or less government, but how it can facilitate private initiative rather than hamper it. 

The above is from the Editorial of The Businessline
Modi is just good at playing to the gallery. 
The only time he is in india is during elections, giving Jhumlas.
The rest of the time he is abroad, backslapping Barrack and the rest as if dropping first names will make India progress.

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