Has doing business in India become easier? The simple answer is no. I have been advising foreign companies establish and do business (big and small) in India for nearly 20 years. During this time India has transformed from a closed economy to an open one and from an agriculture-entrenched system to one of the world’s fastest growing social media user bases.
But it still remains almost at the bottom of the pile in terms of ease of doing business, ranked 137th globally. Old Soviet countries such as Lithuania, Georgia, and Armenia rank well above it, chasing the tails of the super-developed league.
It gets worse. India ranks a pathetic 179th for starting a business, 186th in the world for resolving disputes, and for a basic thing like getting electricity, stands at a shameful 111th.
You would be lucky to have a company set up within three months! Compare that with 24 hours (if that) in the UK.
Hence I was surprised to see a UN report saying that foreign direct investment (FDI) in India had actually increased last year. This shows that Western capital still continues to bank on India’s potential. Company boards around the world, no doubt, are keeping their fingers crossed that the Indian dream will come true some day; just as India’s aspiring youth and helpless poor continue to dream of a better tomorrow.
There are many systematic changes that an in-coming Indian government will need to address. But in my view there are five aspects which I would particularly wish a new government to deliver on. I believe these will help resolve the abysmal results card.
The Indian government cannot rest on its laurels and simply rely on the oft-quoted demographic dividend to pull India through to the top flight of business-friendly countries.
- Interest rates are ridiculously high: This is partly to curb spiralling inflation and a grip on what is Asia’s highest inflation level at 10 per cent is clearly a matter of urgency. Hand over complete autonomy, free from political influence, to the Reserve Bank of India; just as Tony Blair did for the Bank of England almost immediately on coming to power in 1997.
- Kick-start major infrastructure projects: Yes, it is an election year but that should be no excuse to let things slip. It is not enough to simply announce grand schemes and plans. Action is what will set the ball rolling. China is decades, if not centuries, ahead now. I would consider this a war-footing imperative. Good quality infrastructure fuels growth, creates jobs (rural and semi urban unemployment is sky high), and will provide the arteries for a truly modern and dynamic economy. Obvious – yes.
- Mass skills development programme: The mismatch between skills and jobs is a glaring one. The figures speak for themselves as only a tenth of those looking to join the Indian workforce receive any training, in contrast to around 60 to 96 per cent of workers in more developed countries. This is a shambles. I appreciate the work of the National Skills Development Corporation, but critics say it is being bogged down by red-tape and nepotism. I hope not. Let’s have a fresh look here.
- Bring in e-courts and severe cost penalties in legal cases: There is no reason why India should not be leveraging its IT expertise to strengthen our legal system. I am also amazed at the number of frivolous cases which are allowed to reach the courts, and then adjournment after adjournment sought on equally frivolous grounds. Punitive costs for those who are playing and therefore clogging the system have to be a must. What thought needs to go into something as obvious as this?
- Adopt an overall technology-driven approach to all aspects of government interface, which will help circumvent the scope for arbitrary decisions and corruption. Move away from the ‘I know such and such, he will get my work done’ to a policy and technology enabled attitude. Would that work for the uneducated rural poor? Well, that’s the challenge.
India has to do much better if it seriously wants to win the war on poverty. The country has been described as a sleeping giant and it is about time it woke up to its real potential. I feel ashamed when rankings are announced that put India at the bottom of the pile.
May be as a start overtaking say Kazakhstan, which ranks around 50th in the world when it comes to ease of doing business, would be good to aim for?
