THE GIST of Editorial for UPSC Exams : 28 November 2018 (Improving the business climate)

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 resources, growth,
development and employment. Inclusive growth and issues arising from it.

Context

•  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 approval mechanisms.
•  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 business regulation.
•  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 rates.
•  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 implementation.
•  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.

Way forward

•  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 implementation.
•  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.

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

Prelims Questions:

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
4. Mining

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

Answer: A

Mains Questions:
Q.1) India needs to institutionalize sustainable reforms initiated in previous years as well as focus on more difficult areas. Narrate this with examples.