Running Businesses − Where Does The Shoe Pinch?
The World Bank has been bringing out a yearly report on ‘Doing Business’ for the last 17 years. Of the 190 countries in the world, only 115 are tracked for ‘ease of doing business’.
In New Zealand, you can start your business on the same day. No wonder it has topped the World Bank list in the last four years, closely followed by Singapore and Hong Kong. Other high ranking countries in the list are Denmark, South Korea, the USA, Georgia, UK, Norway and Sweden.
Only two African countries make it to the list of 115 countries − Rwanda and Mauritius. In fact, Latin America is the worst continent, where no country is in the World Bank’s reckoning for this purpose.
What factors does the World Bank take into consideration in assessing where the shoe pinches? A dozen parameters are evaluated, of which the most important are employing workers, getting construction permits, accessing power, obtaining credit, paying taxes and enforcing contracts. In the Indian context, three factors are more relevant, registering property, trading across borders and resolving insolvency.
Over the years, which countries have taken this report seriously and made amends? Visual Capitalist observes that Saudi Arabia at 62nd position has jumped several notches. Bahrain has also catapulted itself to the 43rd rank. China has inclined upwards progressively and reached the 31st place. India too is improving every year and has scaled up to the 63rd slot recently, still 13 short of the target.
Niti Aayog monitors India's performance regularly and exhorts state governments to reform their systems. Enormous progress has been made by the Delhi and Mumbai municipalities from the totally porous and corrupt system of the past, by allowing online construction permits. Online tax payments have seen large reforms, enabling India to jump up every year. Many state governments have started single-window clearances to expedite starting of businesses.
Then where and why does the shoe pinch? Being in the government for 35 years and now on the other side as a consultant, I clearly find five obstructions hindering our progress. First, the income tax department is the biggest offender. If the number of tax appeals alone are an indication, the figure runs into several lakhs, involving small and medium businesses. Tax rates and tax collection methods need to drop undue complexities. Tax staff need to upgrade the capacity building in tune with digital processing. Tax laws need coherent simplification and huge reconciliation because each day's delay in getting out of the cobwebs, adds to the interest and penalty burden.
Secondly, a plethora of laws confuses the wisest. As a board member of a sugar-producing company, I found that it was cornered by more than 50 laws in Uttar Pradesh, some dating back to the British period. The law ministry needs to seriously take feedback from industry and trash most of its old, archaic laws.
The third big bottleneck is the court and the engulfment of cases there for eternity. Each high court judge needs to spend a day a fortnight in inspecting lower courts, rewarding good judges and punishing the black sheep. The carrot and stick treatment alone can dilute the coagulated chaos here.
Getting easy credit and registering property without glitches and harassment are two other factors keeping India away from its target. Let the Niti Aayog concentrate on these five issues and I'm sure we will reach the target of the top 50. Otherwise, the danger of sliding back looms large.
