Ease of Doing Business: we can look at
this ranking in two ways : one, as a political tool, analyzing Party A did this
so ranking improved; or Party B didn’t do this, which is why we were bad – or indeed,
Party A didn’t so as great as they claim for x,y,z reasons. The second way is
use it to introspect, and ask ourselves, regardless of ranking, What can we do as a nation along these
parameters, and how can we benefit by doing those steps? In other words,
let us de-link politics from this exercise, at least for the purposes of this
exercise, and go deep into the parameters of what constitutes Ease of Doing
Business.
EODB INTRODUCED
But first, let us settle this Ease of
Doing Business matter, and put it in the proper perspective. First, this is a matter of ranking – not an
absolute; your rank can improve by virtue of factors not in your control.
Second, this ranking is measured in two cities in India – Mumbai and Delhi. By
no stretch of imagination can these two cities be considered representative of
India as a whole. These two points together are enough to allow us to forget the
undue importance given to this ranking. Even if we did deserve the improvement –
even then, it isn’t so vital an issue. What
we need to do is go into the parameters used to measure, and understand how we
can use them for our benefit.
The latest on this is even more interesting
– with the claims and counter-claims regarding the admissibility of the rankings
as they were declared; whichever side of the debate we are on, this is now a
matter embroiled in politics; and politics and economics make for incompatible
bed-fellows. Given that the rankings are based on just 2 Urban Agglomerations,
whose population is 34.75 Million as per the 2011 census – 2.79% of the nation.
As can be seen, that cannot be representative of the entire nation. Even by
GDP, it is around 15-18% of the National GDP approximately. Hardly representative
in the overall national view. Thus, let us move on from this, to more pertinent
matters.
EODB EXPLAINED
The ranking is based on ten indicators
:
1. Starting A Business
2. Dealing with Construction Permits
3. Getting Electricity
4. Registering Property
5. Getting Credit
6. Protecting Minority Investors
7. Paying Taxes
8. Trading Across Borders
9. Enforcing Contracts
10. Resolving Insolvency
Let us not get into what else is needed
for a good Business Environment, and ask ourselves some hard questions.
Further, let us not over-analyse the parameters in which we showed improvement,
but rather zero in on those where we did not perform well, even by the
controversial ranking released sometime last year. Let us look at those – which
were Contract Enforcement, Registering Property, Trading Across
Borders, Dealing with construction permits, paying taxes. A full analysis
of all is beyond the scope of one article; so let us, for now, look at just one
or two parameters that can put things in the proper perspective, and enable us
to get better for ourselves through introspection.
FIRST, CONTRACT ENFORCEMENT
Let us be positive : and start with the
negative first, closing with what we feel is a self-congratulatory note of self
achievement by a positive point. I start, therefore, with contract enforcement.
The data shows that it takes 1445 days in India for contract enforcement. Frankly, having handled a few disputes, I
know this to be irrelevant; highly irrelevant. I have never received the
permission to go legal, or opt for legal enforcement measures. In fact, the contact itself is a mere
formality at times. We all know the kind of backlogs there are in the courts;
this has lead to a situation wherein we normally use social measures like find
common friends, outreach to other party and compromise to resolve any dispute.
The question in front of all us then is,
what can we as a people and a nation do to improve this? For this is one of the
most vital aspects of business. And yet, our social structure and prevalent
Business Norms on the ground are such that at times, dispute resolution is
actually faster than what we perceive, it just isn’t formalized. This is the
cultural aspect of Business in India, as covered in at least one landmark
thesis from an IIM. As proof, I once resolved a dispute
2 years old by simple followup, and reaching out to the other party by the
simple expedient of using a fellow community member, a Gujju. How do we
reconcile these twin realities?
SECOND – EASE OF CREDIT
Just a short and terse summary here. I
was sitting last week with a top manager of a large company, who was deeply connected
to many startups, being a startup evangelist. I asked – why don’t startups avail
institutional credit in greater numbers? The answer: it is too much of a
hassle. Now this is a parameter in which we have performed well; but are our
MSMEs well served? Are the Micro and Small scale sector, which is the bulk
contributor, adequately addressed? I don’t think so. Another anecdote : three
years ago, I came across a company with its production lines closed { I was the
Sr KAM, wanted to clear my OS}; the company had no recourse available. This was
an SME. SMEs don’t get credit as easily as do the bigger corporate, as
documented in one article : “While the
Micro, Small and Medium Enterprises (MSMEs) form an integral part of the
economy, access to credit is a concern that continues to haunt the sector.”
: http://knnindia.co.in/news/newsdetails/msme/credit-crunch-continue-to-haunt-msmes-sector-expect-fresh-air-in-upcoming-budget.
Enough said.
CONCLUSION
Yes – the improvement is welcome, which
is why, despite my many, many questions – most not asked here, I am silent on
the matter by and large. We need all the good news and benefits it brings, fact
is fact. But, let us not get carried away, or look at it from a political prism.
How can we further improve – and what is the real, on-ground situation for all
of India, not just two cities? We need to examine the excellent framework this
ranking system provides, and use it as a motivator to propel further
improvements that can enable us to realise our many ambitions! Let us not
politicise this; let us treat this purely as an economic phenomenon, and use it
as a benchmark for a national project!
BIBLIOGRAPHY
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