Improve 'Ease of Doing Business' by Moving from Ideas to Action
OCTOBER 30, 2015
By TIOL Edit Team
INDIA's dismal profile in The World Bank's global study 'Doing Business (DB) 2016' is worrisome for reasons more than one. First, the country has improved insignificantly its overall ranking among 189 nations to 130th from 134th in DB2015. This is in spite of deafening noise and fury over ideas and initiatives to radically improve ease of doing business (EDB). This campaign spilled over from UPA to NDA regime, which amplified them manifold.
At this rate of 4-notch upturn per annum in global DB sweepstakes, India would require a few decades to achieve modest target of 50th slot in 2017 set by Modi Government.
Second cause for concern is that the country has stagnated in the same respective ranks on five of the 10 parameters such as registering properties, cross-border trading, enforcing contracts, resolving insolvency and protecting minority investors.
The more irritating finding is our decline in two crucial parameters - getting credit and paying taxes. This downslide confirms ground-zero reports that business pick-up has remained obscure so far under Modi Raj.
On the subject of 'Paying Taxes', India has slipped one slot to 157th rank. This is notwithstanding hype over tax reforms which got articulated as EDB in the Finance Minister Arun Jaitley's Budget Speech for 2015-16. He chanted Modi mantras "minimum government and maximum governance" and from "red tape to red carpet" to affirm Government's commitment to EDB.
The authors and researchers of DB2016 team are obviously more interested in concrete action than sloganeering. Like any Indian EDB votary, they obviously want action on recommendations relating to tax reforms in reports of Tax Administration Reform Commission (TARC), three black money studies and other such works.
Apart from improving proposed goods and service tax (GST) framework, the Government needs to revive the idea of Direct Tax Code (DTC). It must prepare a clear roadmap with timelines on tax reforms. Such an initiative would certainly improve India's rank manifold on 'Paying Taxes' parameter (PTP).
See how India compares with four other BRICS countries on this count. The World Bank has not found anything worthwhile that happened in India during four consecutive DB reports
The Bank's brief PTP comparison thus lists only two Initiatives: "DB 2012: India eased the administrative burden of paying taxes for firms by introducing mandatory electronic filing and payment for value added tax. DB 2011: India reduced the administrative burden of paying taxes by abolishing the fringe benefit tax and improving electronic payment."
Similarly, four different initiatives have been mentioned for Both China and Russia. Brazil (DB 2010) and South Africa (DB 2014) had only one reform each to their credit in easing 'paying taxes' process.
Indonesia, which was considered as substitute for India in BRICS by analysts in 2012 & 2013, took five tax reforms initiatives during the same period including two mentioned in DB2016 and DB2015.
Modi must take in positive spirit such subtle and strong negative assessment from other quarters including sidelined BJP stalwarts such as Yashwant Sinha and Arun Shourie.
The Government ought to introspect as to why Indian system fails in converting innovative ideas into deliverables that can be monitored and gauged independently.
It is here pertinent to cite an observation made by Department of Industrial Policy & Promotion (DIPP) in September 2013 when UPA was in power.
In its tender document seeking offers for a study on 'Improving the Business Environment in India', DIPP stated: "The Government has periodically setup Committees to recommend actions for simplification of procedures. However, the implementation of these recommendations by the Ministries and State Governments has been tardy and inadequate."
The least the Government should do is to issue a discussion paper on EDB. It should list the reasons why valuable recommendations made by numerous committees were not implemented. A few recent reports that deserve mention in proposed paper are the Committee for Reforming the Regulatory Environment for Doing Business in India (DBI) that submitted its report in September 2013 under the chairmanship of ex-Sebi chairman, M. Damodaran.
This report was closely followed by issue of another report captioned 'Towards an Optimal Business Regulatory Framework in India'. It was prepared by now defunct Planning Commission's Implementation Group for 12th five year plan in partnership with Booz & Company.
The Government must realize that it can't camouflage mediocrity on the governance front with glitzy foreign tours and interactions by Prime Minister and coining fancy names for its existing schemes. It must leave its mark on the growth and employment generation front. And that can only be done by bringing paradigm shift in EDB environment.
