The cost of Ease of Doing Business ranking

What is diluted, amended, and narrowed down for making it easy for businesses is eroding of the rights of people

Joe Athialy | December 4, 2017


#Demonetisation   #Business   #World Bank   #Ease of Doing Business   #Economy  
(Illustration: Ashish Asthana)
(Illustration: Ashish Asthana)

The ‘Ease of Doing Business’ report of the World Bank could not have come at a better time for the NDA government. The first anniversary of demonetisation, where everything from planning to execution went wrong, and whose impact had broken the back of the economy as never before, was only a week ahead when the report was released on October 31. It was just a week after announcing the Gujarat elections, where apart from fighting an opposition that had reinvented itself, BJP’s tall tower of development built meticulously over the past two decades is crumbling.

The press conference addressed by the finance minister the following day of the release said it all. He said, “The jump that India has got is the highest any country has made in the doing business sector.” The World Bank, he said, has named 10 countries where structural reforms have been undertaken. “India is one of them.”  The prime minister was visibly jubilant. “Over last three years, we have seen a spirit of positive competition among states towards making business easier. This has been beneficial,” he said. A couple of days later, addressing ‘India’s Business Reforms Conference’, a mega event co-organised with the World Bank, he said more reforms would be rolled out to further ease the business climate in the country.

Jumping 30 places to reach 100th place in a list of 190 was a big achievement for this government. Last year, when the ranking remained at 130, the government was visibly angry.

In a response to parliament then, the government expressed reservations about the methodology of the assessment parameters on the World Bank’s ‘Doing Business Report’ where it had been ranked 172 amongst 190 countries on paying taxes. This year, it moved up 53 places on paying taxes, one of the parameters on which the ranking is done. The then commerce and industry minister said that “the efforts and reforms undertaken by the centre and states have not been adequately captured in the ranking released by the World Bank.” The PM asked the secretaries at the centre and chief secretaries in the states to analyse the World Bank’s Ease of Doing Business Report, to remove hurdles and speed up implementation. Little over a month after the report was released last year, the government chalked out an eight-point strategy to make it to the top 50 of the list, as targeted by the PM. While the target continues to elude India, some things seem to have worked in frog-leaping the 30 places.

Relaxation in the norms and procedures – ‘reforms’ in the World Bank lingo – for establishing business is fundamental to move up the ladder of ranking.

The improved ranking has come at the cost of environmental safeguards, something which was planned and executed with finesse over the past several months, as confirmed by the then commerce & industry minister in her reply to a question in parliament in the monsoon session this year.

In a reply to a question by V Elumalai (AIADMK) and Jayshreeben Patel (BJP), what the then minister of state for commerce and industry, Nirmala Sitharaman, says is noteworthy:

“The Government has taken several steps to improve ease of doing business in the country.

“The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, in partnership with the World Bank Group, released the Business Reform Action Plan (BRAP), 2017 for implementation by States/UTs on 13.04.2017. The BRAP includes 406 recommendations for reforms on regulatory processes, policies, practices and procedures spread across 12 reform areas, that is, labour regulation enablers; contract enforcement; registering property; inspection reform enablers; single window system; land availability and allotment; construction permit enablers; environmental registration enablers; obtaining utility permits; paying taxes; access to information and transparency enablers and sector specific reforms spanning the lifecycle of a typical business. (emphasis added)

“This year there are 103 new reform measures (out of 406) on central inspection system, online land allotment system, online single window system for granting construction permits...

“The Government’s target is to improve the business regulatory environment of India and India’s ranking in World Bank’s Doing Business Report. Government has urged the Central Government Ministries/ Departments to analyse the World Bank’s latest Doing Business Report. Nodal Departments/Ministries have been identified for each of the 10 indicators of the Report…. Ministries/ Department concerned have been provided with the set of reforms which need to be implemented and have been asked to identify additional areas related to the Department where reforms and corrective measures need to be taken to ensure time bound and effective implementation of the reforms.”

(Source: Lok Sabha Unstarred Question No. 208. Answered On 17 July, 2017)

The answer makes it clear that more ‘reforms’ on regulatory processes, policies, practices and procedures in key sectors are to be expected, since out of the 406 recommendations, only 103 are done this year. And with the target of making it to the 50 target, those changes in policies could be a radical departure from where the country stands now.

Why does the government let the World Bank continue to prescribe ‘reforms’ in our policies? Haven’t we learned a lesson from the past? Why is this government so touchy about the ranking that it is leaving no stone unturned to go up the ladder? Or is the agenda slightly different, for the government and institutions like the World Bank and Asian Development Bank (ADB)?

In its recent Country Partnership Strategy for the period 2018-22, released in September 2017, ADB proposes annual lending of $3-4 billion compared to an average of $2.65 billion per year in 2012–16. It sets aside 85 percent (about $12.75 billion to $17 billion) of total lending in the next four years for three sectors – transport, energy and urban infrastructure. It prioritises “strengthening ADB’s role in providing effective strategic and policy advice” for economic corridors and smart cities, among others.

A similar strategy for World Bank – the Country Partnership Framework – is awaited.

Without relaxing “regulatory processes, policies, practices and procedures” projects of the magnitude of economic corridors or smart cities, or mega projects in transport, energy and urban infrastructure will never take off. These projects cannot come up without usurping large tracts of land, forests and water bodies, impacting the lives of millions of people and the fragile environment.

Just the change in policies and procedures would not result in dramatic increase in investments. If that were the case, the story of Gujarat, where the red carpet was laid in the form of Vibrant Gujarat Summits since 2003 would have resulted in massive investments. However, what this does is to rob people of their rights to protect their land, livelihood and natural resources. Pulling the rug under their feet, by way of removing or diluting the policies, disempowers the people from challenging the onslaught on their right to life and livelihood.

The 30-place jump in the ranking comes at an enormous cost, depth of which will unfold in the years to come. What is diluted, amended, and narrowed down for making it easy for businesses is in fact eroding of rights of people. The Kodak moment for a better ranking in an Ease of Doing Business report is short-lived, while the impact of all that we have done to reach that ranking is a death knell to countless landed and landless, poor and marginalised, small and marginal communities.

To recast a famous Native American saying: When the last tree has been cut down, the last fish caught, the last river poisoned, only then will we realize that one cannot eat Ease of Doing Business ranking.

Athialy works with Centre for Financial Accountability (www.cenfa.org).


(The column appears in the December 15, 2017 issue)

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