Improving the business climate
Mains Paper 3: Economic Development
Prelims level: Ease of doing business report 2019
Mains level: Indian Economy and issues relating to planning, mobilization of
development and employment. Inclusive growth and issues arising from it.
- The World Bank’s Doing Business 2019 report is out and the
government has lapped it up for obvious reasons.
- No large country has registered gains like India in the past
couple of years.
- The government deserves credit where it is due. The required
political will has been ably demonstrated by the Prime Minister’s personal
attention to the task.
- The political will also waxes and wanes.
- Therefore, it now needs to institutionalize sustainable reforms
initiated in previous years as well as focus on more difficult areas.
Coming back to India
- The report notes that it continued to streamline and centralize
its construction permission process by implementing single-window and online
- India has been a front-runner in the use of information technology
(IT) and thus making substantial gains on ‘construction permits’ should not
come as a surprise.
- Another area in which IT has proved to be a game changer is
‘starting a business’. The report notes that in the previous year, maximum
number of reforms (50) was recorded in this area.
- Simplifying preregistration and registration formalities through
use of IT is the most popular manner of undertaking this reform.
Three existing dilemmas
- India is no exception and has climbed 19 ranks.
- Such prioritization of ‘easy to adopt and move up the rankings’
areas over ‘difficult to implement yet important’ areas is tempting, not
completely unjustifiable, but begs serious reconsideration.
- Reliance on IT and online process, while important it needs to be
complemented with training and capacity building.
- The second dilemma of doing business reforms should training
precede reforms or vice versa?
- This year’s report tries to answer this question with ‘training
for reform’ as its central theme.
- It establishes a significant positive association between the
availability of training programmes for public officials and streamlined
- Training for officers at land registries, judges, prosecutors and
engineers serves as a platform to acquire new skills and keep existing
knowledge up to date.
- In the area of judicial performance, those economies that make the
training of judges mandatory are more likely to enjoy higher resolution
- However, persistent training and capacity building initiatives do
not grab headlines and are unlikely to yield results in the short term.
- This may be a reason why reforms in ‘enforcing contracts’ have
been pushed to the back burner. Judges in India lack understanding of
complex linkages between governance and economy. Their tendency to take
economically irresponsible decisions is putting a significant number of jobs
at risk and substantial investment in peril. Our estimates suggest adverse
economic impact of around ₹500 crore for every 1,000 km stretch of highway
covered by the recent decision of prohibiting sale of alcohol on highways,
without any discernible benefit.
- The third dilemma of doing business reforms is ensuring
- The report acknowledges that “Reform efforts will not always
result in immediate improvements; indeed, some may have no impact at all.
- Efficient design and poor implementation are just two factors that
explain why some reforms succeed while others fail.
- It suggests effective communication of reforms as one of the best
practices to improve implementation.
- Post facto communication is necessary but not sufficient to ensure
- Beneficiaries need to be involved in the process of designing
reforms, through mechanisms like structured stakeholder consultation and
regulatory impact assessment, to facilitate seamless implementation.
- Improving on doing business rankings is indeed important. However,
such improvement must be guided by the genuine need of improving business
climate and not just rankings.
Q.1) Which among the below given industries constitutes the list of
industries reserved for the public sector
and where private companies cannot enter?
1. Atomic energy
2. Railway transport
3. Arms and Ammunition and defence equipments
Choose the appropriate code:
a) 1 and 2 only
b) 1, 2 and 3 only
c) 1, 2 and 4 only
d) All of the above
Q.1) India needs to institutionalize sustainable reforms initiated in
previous years as well as focus on more difficult areas. Narrate this with