Improving the Ease of Doing Business in India

We have been seeking
to track India’s performance in World Bank’s Doing Business rankings for the
last few years (with the last one available here).
India has not made much progress in recent years on the overall scores, except
on a few specific parameters. This has also become a cause of concern for
foreign investors.
The Government has
now taken cognisance of these issues and the Department of Industrial Policy
& Promotion under the Ministry of Commerce and Industry has issued a
document titled “Major
Initiatives by DIPP on Improving ‘Ease of Doing Business’ in India
”. This
document contains significant measures in terms of the use of technology,
removal of impediments in the licensing process and the creation of
single-window clearance mechanisms, especially in areas where licensing is
required to establish or carry on a business. Since a number of licensing
measures are undertaken by the States, the Ministry has also written to the
State Governments to partner with it in ensuring that there is further easing
of doing business in the country. The more specific measures are contained in
the Ministry’s document linked above.
Given the various
concerns expressed by businesses and investors (both domestic and foreign)
about government policies for establishing and carrying on businesses as well as
in obtaining foreign investment, this is certainly a welcome move. Businesses
and investors require clarity and certainty as to policy one way or another,
which was lacking in many areas. The Ministry’s document sets the tone for
addressing the issues at a macro-level. At the same time, much depends on how
these policy level pronouncements are in fact implemented on the ground. But,
the intention at least is quite clear now.
While it is useful
to raise India’s ranking on the Doing Business lists, that ought to be the
means rather than the end. While it is certainly important to improve India’s
rankings as they perform the role of indicators as to India’s policy
environment for businesses, the policies ought not to be dictated solely by the
rankings. Moreover, the rankings may not necessarily be an accurate measure of
realities on the ground. On balance, while rankings cannot be ignored
altogether, they cannot be taken for granted either as a determinant of
government policy on doing business.
For some
interesting recent literature on doing busines rankings and indicators, please
see an volume titled “Governance by
Indicators Global Power through Classification and Rankings
” edited by a
group of professors from NYU and a paper on
by two of my colleagues.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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