Small Scale Business Problems

Will India’s jump in ease of doing business rankings foster economic growth?
4 min read . Updated: 14 Nov 2017, 08:07 AM ISTDipti Jain, Tadit Kundu
India's jump in ease of doing business rankings may not readily translate into investments and growth, an analysis of past changes in rankings suggests

Among the 190 countries surveyed in World Bank’s Doing Business 2018 report, India saw the biggest rise in its ranking. While the rise in India’s ease of doing business rank from 130th in 2017 to 100th in 2018 is welcome, there are three key reasons why it may not necessarily mean a turnaround in investment and economic growth.
Firstly, the improvement in the ranking often is not sustained over the long term. For example, consider the period between 2007 and 2009. Out of the 10 countries that improved their ranking the most in those three years, seven now rank worse than what they did in the 2009 report.

According to the World Bank, the ranks are not strictly comparable across years because the methodology changes often, with new parameters being added to the study in successive years. For example, since the 2016 edition, the indicator on ease of getting electricity began to include indicators on reliability of supply, price of electricity, and transparency of tariffs. However, what this also means is that under a future ranking system based on an altered methodology, even India may slip in rankings without any material change in regulations or business environment.
Secondly, even if the improvement sustains, it does not necessarily lead to higher economic growth or greater foreign direct investment (FDI) inflows, an analysis of 10 major economies which saw large improvements in their ease of doing business rankings shows. These economies are those with gross domestic product (GDP) worth at least $200 billion as of 2016 which saw the largest jumps in rank between the period 2007-09 and 2018. Improvement is measured in terms of the difference between the worst ranking between 2007 and 2009 and the latest rank.

Many of the above economies, despite climbing several places in their ease of doing business rankings, have not seen much improvement in growth or FDI inflows. On some of these economies, such as Russia, Turkey and Egypt, investor sentiment has substantially deteriorated. Standard & Poor’s recently included Turkey and Egypt in its list of “fragile five" economies along with Argentina, Pakistan and Qatar. Of course, external factors, beyond the control of policymakers, have also played a role in dampening the outlook on these economies. Egypt and Turkey have grappled with political instability while Russia had to tackle sanctions and the impact of falling oil prices. But this goes to show that ease of doing business rankings seldom determine a country’s economic fortunes.

Even in the absence of such external misfortunes, it remains debatable whether a pro-business reform stance necessarily leads to higher growth. John Cochrane, a fellow at the Hoover Institution at Stanford University and an influential economist on the right in the US, has often argued that easing regulations is a much more potent weapon to re-energize the American economy, compared to any imaginable monetary or fiscal stimulus. His views have been challenged, most notably by Berkeley economist Bradford DeLong who criticized Cochrane’s analysis as being crucially dependent on making unreasonable extrapolation from a weak correlation.
The debate prompted Princeton undergraduate student Evan Soltas to systematically analyse the impact of big reforms in a particular year on economic growth in subsequent years, for different countries. He found little impact of such reforms on growth and termed them ‘economically neutral’. He argued that enacting pro-business reforms could not be a substitute for deeper structural reforms, such as those targeting the state of education, health, transportation, power, and sanitation infrastructure.

As an earlier Plain Facts columnpointed out, there is absolutely no correlation between economic growth and ease of doing business rankings. Others have argued that there is indeed a link between per-capita incomes and ease of doing business rankings. But such correlations do not mean that ease of doing business has led to high per capita incomes. The link between per capita incomes and ease of doing business rankings may simply reflect the fact that on average, countries that prosper tend to have stronger institutions which tend to lead to a host of positive outcomes, including relative ease of doing business.
As Soltas argues, countries with illiberal policies towards business “probably have other problems that restrain economic development, but countries that change those policies in a sharply pro-business direction don’t necessarily solve all those deeper problems in the same sweep".

Thus, the historical experience of other countries and the academic debate on the subject cautions us against being euphoric over the measured improvement in India’s doing business indicators.
Finally, what weakens the case for the ease of doing business rankings is that they capture de jure processes rather than de facto realities on ground, as has been argued recently by Matthew Lillehaugen and Milan Vaishnav, fellows at the Carnegie Endowment for International Peace.
The World Bank’s Doing Business 2018 report reflects the assessment of experts such as lawyers and accountants, with respect to rules and regulations. However, their assessment might be at variance with what enterprises actually experience on ground. To illustrate, the time taken to start a business in India—in both Mumbai and Delhi—is purportedly around 30 days, according to World Bank’s ease of doing business reports for the last three years. But, the enterprise-level survey conducted by NITI Aayog and IDFC Institute in 2016 showed that the average time taken to start a business in India was more than 100 days.

Even start-ups, i.e. firms which began operations during or after 2014, said that the time taken to start a business was 85 days in 2016, much above the 30-day period suggested by the Doing Business reports for the same period.

The combined weight of the evidence suggests that the recent improvement in ease of doing business rankings may not mean much for India.

Will India’s jump in ease of doing business rankings foster economic growth?

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The World Bank’s terrible response to controversy over India’s Ease of Doing Business jump

JUSTIN SANDEFUR 16 February, 2018 4:10 pm IST

World Bank Building

World Bank Building in Washington, DC | Getty Images

The World Bank’s response to the criticism of its ‘Ease of Doing Business’ rankings comes with no substantive rebuttal.
Reasonable people can disagree about the usefulness of the World Bank’s country rankings. But after the Chief Economist resigned amidst a controversy about the index, the Bank has made a number of misleading claims, including defending numbers in the press that its researchers have quietly repudiated.

In the past few weeks, my colleague Divyanshi Wadhwa and I published two pieces examining the controversy over the World Bank’s Doing Business index, which measures the regulatory burden facing businesses around the world. Our first piece examined the case of Chile, investigating the World Bank Chief Economist’s own revelation that methodological changes to the index had caused Chile’s rank to fall during Michelle Bachelet’s Socialist government, rise under her conservative successor, and fall again when she came back to power. Leaving conspiracy theories aside, our analysis—for which we released data and code—confirmed that this pattern of fluctuations was far greater than what we could reproduce using a consistent methodology over time.

Our second piece questioned the results for India, whose sudden rise in the World Bank rankings has been celebrated by Narendra Modi’s government. Once again, holding methodology as constant as possible, the sudden surge under Modi’s government became a modest rise.
Last week, CGD published a response to our analysis by Shanta Devarajan, senior director for Development Economics at the World Bank, and also a member of CGD’s Advisory Group. He concluded that our analysis was “neither enlightening nor useful.” Read it for yourself, but my quick summary of Shanta’s reply is:

  1. Rankings are relative, so yes they change due to others’ actions.
  2. The methodological changes are purposeful improvements, not flaws.
  3. India has genuinely reformed.
I accept all three points. Nevertheless, Shanta’s response—cleverly titled “Wrong Criticisms of Doing Business”—does not actually say we’re wrong. It doesn’t address the core substantive flaws in Doing Business discussed in our first post or, in my view, rebut the core technical claim we made: that changes over time in Doing Business rankings rely on apples to oranges comparisons, and that using a consistent methodology shows much smaller changes in the ranking for both Chile and India over time.

Three misleading statements in the World Bank response

Senior World Bank staff have demonstrated the confusion and misinterpretation that can result. Last week, the World Bank Country Director for India, Junaid Ahmad, appeared on India’s CNBC-TV to answer a journalist’s questions about the Doing Business fracas.

Watch for yourself:

The Bank is under pressure to defend Doing Business, and Dr. Ahmad is eager to keep warm relations with a major client government. But unfortunately, a lot of what he suggests in his statement is at best misleading.

Here are three cases:

1. “All the shifts that you’re seeing [are] based on ground realities, of policymaking and impact on the ground. And these are feedback directly from the companies themselves, from the small and medium enterprises.”

The Doing Business index is not, and never has been based on reports from small and medium enterprises “on the ground.” It is based on a survey of a very small sample of experts, mostly lawyers, management consultants, and government officials. They are asked not to report the reality on the ground, but rather the de jure regulations applying to a hypothetical firm if the law were applied strictly. Analysis by the Bank’s own researchers shows these de jure rules bear little resemblance to the de facto reality on the ground in many client countries.

2. “[The improvements in India’s ranking] are not an artefact of methodology, or an artefact of data.”

In this case there is something of a smoking gun, as the Doing Business team altered the previously published numbers for India and other countries after the fact.
The 2017 Doing Business report is no longer linked from the Doing Business website as far as we can tell, but it is still available online here. If you go to page 213 you’ll see that India ranks 130th with an overall “distance to frontier” (DTF) score of 55.27. But if you look at the current Doing Business website, you’ll see that the 2017 score has been changed to 56.05.
The World Bank has been insistent that it used a comparable methodology to 2017 in calculating the 2018 score. And in fact, it does now report 2017 and 2018 DTF scores using what appear to be a comparable methodology. But note that these were added after the fact—they are not what was reported in 2017, and not the basis for the 2017 ranking of 130th. The ranking of 130 is based on a different methodology. If you use the data currently on the website, India’s 2017 rank would have been 123 not 130.
So even accepting all of the methodological choices the Bank made and taking them at face value, the idea that India’s jump is “not an artefact of methodology, or an artefact of data” is wrong.

Figure 1: Gaps between the Doing Business report and the data online
The graph shows the change in rankings between the 2017 and 2018 reports, minus the change in rankings using the revised data on the World Bank website.

Most of the Doing Business rise in India is fragile to recent methodological revisions (as we showed in our earlier post), and in addition it is now clear that some of the 2018 jump—i.e., 7 points out of the 30-point rise—is due to an even simpler, more objective error. Notably, the World Bank revised India’s data in mid 2017 but used numbers it had already deemed incorrect in its October 2017 press release, and now refuses to publicly acknowledge the discrepancy.
3. “Everyone is worried about the ranking, but everyone has forgotten that ultimately what we look at is something we call distance to the frontier.”

On October 31, 2017 the World Bank in India issued a press release with the headline: “India Jumps Doing Business Rankings with Sustained Reform Focus.” The opening paragraph of the press release also stresses the rankings, and India’s move from 130 to 100. The distance to the frontier score appears only later in the press release as “one of the key indicators” in the survey.
The 2014 external review of Doing Business led by former South African finance minister Trevor Manuel recommended that the Bank discontinue the overall country rankings as part of the Doing Business report. The Bank chose to disregard that recommendation, because rankings are a powerful marketing tool. But the India and Chile cases show the pitfalls of a focus on marketing rather than substance.

Paul Romer’s departure doesn’t erase the facts he uncovered
It is worth returning to Paul Romer’s initial allegations about Doing Business:
  1. Romer documented clear cases where the Bank made methodological changes that affected the rankings, then went back and altered earlier data after the fact. He announced that the Bank would produce revised rankings for recent years to correct for these changes.
  2. Romer then went further, implying—in a Wall Street Journal interview, and emails shared with the Financial Times—deliberate, politically-motivated manipulation of the Doing Business rankings, and wholesale fabrication of data by World Bank researchers. After a public rebuke from the World Bank CEO, Romer walked back most of the accusations in category (2), and Jim Kim accepted his resignation on January 24.
Most people we’ve spoken to consider the second set of allegations unfounded, and we’ve seen no direct evidence of malicious intent in the data revisions. However, Romer’s departure does nothing to erase concerns around the first set of allegations, and these remain unaddressed. The World Banks’ reaction to our posts suggests that the institution would rather sweep these concerns under the rug. For an organization that prides itself on producing quality data to inform the global development community, that’s not good enough.
The article was originally published by Center for Global Development, Washington DC
Justin Sandefur is a senior fellow at the Center for Global Development, Washington DC. You can follow him on Twitter @JustinSandefur

The World Bank's terrible response to controversy over India's Ease of Doing Business jump
A ‘social’ index for Ease of Doing Business
Nilanjan Ghosh Soumya Bhowmick Roshan Saha | Updated on May 28, 2019 Published on May 28, 2019

The SDG index is a better alternative to the World Bank’s parameters as it takes a holistic view of development
The Modi government, willy-nilly, promoted “competitive federalism” among States through its “Make in India” initiative, with the apparent objective to improve the nation’s rank in World Bank’s Ease of Doing Business (EoDB).
The States responded positively and happily jumped onto the bandwagon to woo investors to invest in their jurisdictions. The initial recommendations from the PMO on 98 reform measures in 2014, based on the 10 business topics tracked and monitored by the World Bank’s doing business report, was later extended to 340 points encompassing a Business Reform Action Plan (BRAP) for the Indian States. This was construed as pertaining to “58 regulatory processes spread across 10 reform areas that cover lifecycle of a business”.
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There are two clear concerns against this. First, it is uncertain whether such indicators that essentially call for reducing the “transaction costs” from the governance perspective adequately capture the on-ground conditions of doing business, as has been pointed out by a recent publication by the Asia Competitiveness Institute (ACI), National University of Singapore.
Second, in no way, can these conditions adequately represent the overall business environment that can woo investors: these reflect very few partial conditions.
History and political environments have a massive bearing on business environment. As an example, the hostile business environment prevailing in the 34 years of rule of the Left Front in West Bengal left the State languishing, despite late attempts toward revival by CM Buddhadeb Bhattacharya.
The situation has not improved much despite the present West Bengal government’s excellent performance in BRAP implementation. On the other hand, despite Odisha’s inclement natural conditions and Maoist threats in certain corners, the stable State government has been able to woo private investors thereby converting underdeveloped districts to engines of development.
Our contention is that EoDB, as per the World Bank definition is reductionist, and in no way, a true reflection of ground reality. This position has also been taken by the ACI, which has come up with its own index on ease of doing business on the basis of three broad parameters:
Attractiveness to Investors, Business Friendliness, and Competitiveness Policies. This is definitely a substantial improvement over the World Bank’s one !

Based on our ongoing research, we suggest that the States should concentrate on the UN sustainable development goals (SDG) as major enablers of business competitiveness. With this hypothesis in mind, we developed an SDG index for 23 States. This is a weighted index considering 14 of the 17 SDGs based on 76 indicator variables’ normalised values.
These 14 goals reflect the status of SDGs’ achievement in States by taking into account parameters that are characteristic of the socio-economic fabric of the nation. This is a clear improvement over the one developed by NITI Aayog on two grounds: (a) the “ad-hoc”-ness in weight determination of the component indicators has been removed through statistical methods like principal component analysis, (b) the crucial ‘climate action’ goal, blatantly neglected by the NITI Aayog, has been incorporated in our index. The ranks of the States are the ones given in the accompanying table.
As such, there is a two-way causality between business performance and SDGs. While, the role of the private sector and multilaterals is being seen as important drivers for achieving SDGs globally, the private sector is transcending the unidimensional goals of short-term profit maximisation, and focusing on sustainability parameters in an attempt to create a long-term business strategy. This is because SDGs create enabling business conditions through the following ways.
(i) Decreasing long term risks: Addressing SDGs help in tackling long-term risks emerging from environmental, political, and social dimensions, while protecting market competitiveness ahead of required policy implementations. This reduces long-term “transaction costs” for businesses.
(ii) Governance: Transparency in sustainability risks and impacts, as a positive externality of achieving SDGs, leads to decrease in information asymmetry, thereby creating better governance processes.
(iii) New business opportunities: Business solutions, aligned with the SDGs, have huge potential of market expansion, revenue maximisation, and job creation, through partnership creations at various levels.
(iv) Competitiveness: Deepening partnerships for SDGs and integrating them in national and corporate budgets can help in increasing business competitiveness, market resilience and company goodwill.
The above contention is based on the premise that SDGs address the input and product market conditions through bolstering the potentially available capital classified in four types, namely, physical capital, natural capital, social capital and human capital, which are critical inputs to businesses to thrive.
Almost all the SDGs are embedded in one form of capital or the other, i.e., human (SDGs 1 – 5: reflecting on poverty, hunger, health, education, and gender equality), physical (SDGs 8 and 9: employment, growth, industry, innovation and infrastructure), natural (SDGs 14 and 15: life below water and land respectively) and social (SDGs 10 and 16: social institutional variables etc).
Interestingly, our econometric analysis shows that the SDG index, devised by us, is a statistically significant causal variable explaining the Ease-of-Doing-Business Index, as developed by the Asian Competitiveness Institute (ACI).
We also find a significant causal relation between this index and per capita foreign direct investment (FDI) in the States, indicating that financial capital gets drawn towards those destinations where enabling business conditions are already created through prevalence of the four types of capital.
The above argument buttresses our contention that SDGs should be treated as important cornerstones of “competitive federalism” in the Indian context, rather than the World Bank-DPIIT metric of EoDB, or any other development parameter.
This is from two perspectives. The first is from the perspective of attracting businesses and financial capital. The second is from the perspective of looking at development through a holistic lens bringing in the efficiency, equity, and sustainability concerns in one frame.
Ghosh is Director, ORF Kolkata, Bhowmick and Saha are Research Assistants, ORF Kolkata. Views are personal.

A ‘social’ index for Ease of Doing Business
Doing Business Rankings: Reforms Must Focus on On-Ground Realities for Trade Facilitation

C Nalin Kumar
C Nalin Kumar ([email protected]) teaches at the School of Management, Presidency University, Bengaluru.
Vol. 55, Issue No. 2, 11 Jan, 2020
2 January 2020

The latest Doing Business (DB) 2020 report places India 63rd among 190 countries, 14 places ahead of its position the previous year. While reforms in the areas of enterprise promotion and reducing red tape are always necessary, reform measures exclusively to attain a higher rank might jeopardise the priorities of that sector. The real success of a higher rank in DB could be in the form of hard infrastructure and last-mile connectivity rather than reducing a few certifications and office visits, making DB reforms go beyond just serving a higher rank.
The latest Doing Business (DB) 2020 report places India 63rd among 190 countries, 14 places ahead of its position the previous year. This jump is attributed to reforms in three areas: the resolution of insolvency (52nd from 108th), construction permits (27th from 52nd) and trade across borders (68th from 80th). The report found India to be among the top 10 reformers among 190 countries along with China and Pakistan. Sustained reforms on vital parameters of DB require several calculated moves and departmental coordination, and the latest ranks, on prima facie, indicate that India’s reforms are paying off. Many national governments, including those of Pakistan, Georgia, Armenia and Nigeria, invite members of the World Banks’s (WB) DB team to consult and advise reforms that can improve the country’s rank (MG Link News 2018; Wade 2019; Armenpress 2019; Sun 2016). Many governments appear to use improvement in rankings as an evaluation of specific reforms and as a sign of greater investment in the future. While reforms in the areas of enterprise promotion and reducing red tape are necessary, measures almost exclusively to attain a higher rank can come with risks. An improved rank does not easily translate into an increase in investments in the context of global production networks. Enterprises around the world might not wait for the DB report to take decisions on their investments or locations of activity as they scan the business environment on a real-time basis.

Issues of Methodology
There are other problems associated with DB rankings, particularly related to their methodology. While the WB has been publishing DB reports since 2003, they commissioned and published an independent evaluation on their approach in 2008 that warned readers of the limitations of the rankings. For instance, they identified that DB does not measure corruption (WB 2008). Moreover, criticism and controversies about the WB’s evaluation of labour regulation forced it to conduct this independent evaluation in 2008, follow it up with an examination by a consultant group in 2011 and a review by an independent panel in 2013. The panel advised the WBG to continue collecting data about labour regulations but to stop using the indicator in calculating the DB ranking of countries (WB 2013).
Until 2009, DB surveys had collected information only based on business practices in New Delhi and Mumbai. In 2009, DB ranked 17 Indian cities, thus identifying good practices of different states (WBG 2009). To make it more representative of India’s diverse regulations at the federal levels, the group has announced that from 2021 onwards, they will also include surveys conducted in Kolkata and Bengaluru (News18 2019). As DB rankings became the government’s obsession during the early years of this decade, administrators implemented a series of measures that would make the country more business-friendly, placing important consideration on the role of states in reducing red tape. In 2014, the Department for Promotion of Industry and Internal Trade (DPIIT) started the initiative jointly with the WB to rank Indian states on their ease of doing business. Ranks were based on how far prescribed reforms—initially, a 98-point action plan, which later expanded to 340 in 2017—were completed (DPIIT 2017). We still witness the ranking of states based on an ever-expanding set of reform topics and annual revisions in methodology. The National Council of Applied Economic Research (NCAER) publishes the “State Investment Potential Index (SIPI)” that ranks states based on different parameters. The Niti Aayog’s IDFC Institute Enterprise Survey of Indian States (2016) differs from DB rankings as it aims to capture the direct perceptions of organised manufacturing firms in states on the regulatory compliance process and approval procedures rather than the perceptions of regulatory institutions or implementing agencies. This enterprise survey also attempts to capture the difference between the de jure processes and the de facto realities due to issues of implementation and understanding of systems by enterprises and is a testimony to the poor correlation between DB rankings and enterprise surveys. Unfortunately, government officials are taking measures to achieve a higher rank in DB reports at a time when the criteria to become a favoured destination for investments and manufacturing activities changes often because of innovation in robotics, automatic, 3D printing and other areas.
One of the topics that the DB surveys consider important, but that has not been prominent in other ranking reports, is trade across borders (TaB). This is particularly important in India’s case because it was ranked 68th among 190 countries in 2020, moving 12 places ahead of its position the previous year. This ranking measures a reduction in “hassles” (in terms of time and costs) of importing and exporting. In the modern world, production networks and advancements in logistics have reduced the importance of national borders and resulted in trade in tasks—a trend where “activities of firms that were previously provided in-house are now outsourced, i.e. supplied by an independent firm” (Lanz et al 2011). Moreover, trade between firms takes place at a larger scale and greater value than trade between countries (Melitz 2003).
There are five reasons why reforms under this sub ranking must be examined and critiqued. First, one of the most cited reforms in 2015 was the reduction in the number of mandatory documents for trading from seven to three. This was also included in India’s Foreign Trade Policy 2015–20 (Ministry of Commerce 2015). The seven documents were (1) bill of landing, (2) commercial invoice, (3) foreign currency exchange form, (4) packing list, (5) shipping bill, (6) technical standards certificate, and (7) terminal handling receipt. The new requirements were just the bill of landing, the commercial invoice cum packing list, and the shipping bill (Ministry of Commerce, 2015). However, this does not have a significant impact in practice because different importing countries require about half a dozen certificates based on the sectors and products imported. Many traders in the agri-food export sector hardly felt any actual reduction in documentation in their day-to-day export and import activities (Kumar 2016).
Second, while the Single Window Interface (SWIFT)—where various departments issue certificates online on a single paperless platform—was touted as a unifying platform, it has several limitations. It has been difficult for traders to obtain them as their offices are often not close to central ports (Kumar 2016). Third, DB’s evaluation of India’s efficacy in trade across borders was done mostly based on Mumbai’s infrastructure. Rather than a comprehensive account of all ports across India, the report focused on activities at Mumbai’s Jawaharlal Nehru Port Trust (JNPT), despite claims that reforms apply to both Mumbai and New Delhi in DB’s 2020 report (WB 2019). Thus, the measures undertaken at the JNPT alone would push India’s TaB rank significantly higher—from 146 to 80 (Hindu 2018).

Table 1: India’s performance in the Trade across Borders parameter of DB, 2016–2020.

YearsTaB RankDtF# ScoreTime to ExportCost to ExportTime to ImportCost to Import
Documentary Compliance (hours)Border Compliance (hours)Documentary Compliance (US $)Border Compliance (US $)Documentary Compliance
Border Compliance (hours)Documentary Compliance (US $)Border Compliance (US $)

Source: WB 2016; 2017; 2018; 2019; 2020.[1] "#" refers to "distance to frontier."

Fourth, undoubtedly, as evident from Table 1, India’s efforts to facilitate trade reflect in the latest rankings and the absolute score of “distance to frontier” compared to last year. As per the DB report 2020, the rank improved from 80 to 68, and the distance to frontier score improved to 82.5 from 77.46. While there has been recorded progress in some of the parameters of TaB in between 2017 and 2018, including the absolute measure of distance to frontier, India’s rank in TaB deteriorated by three positions. Some of the figures corresponding to the time and cost remain the same across 2016 and 2017 and between 2017 and 2018, which raises reservations over the accuracy of them (Table 1). Though progress in rank in a specific area such as TaB is also dependent on reforms, the WBG had claimed the DtF maps the progress made in absolute terms. A country’s progress in rank in a specific parameter such as TaB is dependent on reforms made in other countries as well. Thus, if other countries, particularly those at a close rank as India, achieve significant reforms in the same parameter, then, relatively, India’s rank will not change. To circumvent the limitations inherent in these relative measures, the WBG claims that measure of DtF maps the progress made in that parameter in absolute terms.
Fifth, there are points of contention related to parameters measured by DB and domestic institutions. For instance, in 2018, India’s customs department had introduced radio frequency identification to track freight containers in real-time. Based on their calculations they claimed the release of goods took about 100 hours in JNPT whereas the WBG claimed the number was about 265 hours (Times of India 2018). This indicated that the actual time taken to release a container in JNPT was almost half of what DB claimed in its 2018 report. The government department, to support their argument, claimed that this was in accordance to the data captured in the Indian Customs Electronic Gateway (ICEGATE) and this progress was not reflected in the DB’s 2018 report (Times of India 2018). In short, it appears that DB overhauled their process of collecting information from stakeholders, particularly on various subtopics, only for the 2019 DB report. This bridged the gap between perception and reality.

Impact on Traders
A major beneficiary of India’s DB reforms is JNPT and the traders using this port. However, other ports in India do not even have basic functional customs electronic data interchange (EDI). This indicates the concentration of reforms exclusively meant to enhance a particular rank, such as the adoption of advance import declaration and development of the fourth container terminal. Proponents for such a concentrated push argue that given that JNPT is India’s largest container port (handling more than half of India’s container-based trade [JNPT 2018]), DB-induced reforms would directly benefit the greatest proportion of the traders. However, this can add to the ordeal of other ports by making them less preferred, opposing the very fundamentals of balanced growth or regional development. There are examples of exporters based in Mangaluru availing Mumbai’s JNPT, and those in Bhubaneswar sending containers to either Vishakhapatnam or Kolkata leaving aside their closest ports for the reasons stated above.
In 2016, out of the 298 ports in India, only 132 were on the EDI platform (S Arun 2016). Further, the customs department, as per the information on the ICEGATE portal, claims around 98% of India’s foreign trade is through 134 EDI enabled ports (Department of Revenue 2019). There are issues with containerised cargo or vessel connectivity even in other major ports, and these issues ensure minor ports remain minor. When a port is congested, additional congestion charges are levied, and this is an instance where a DB reform adds to the existing congestion and regionally unbalanced development. For instance, many exporters prefer Chennai port over a few other ports as the consignment gets on board the vessel and to the buyers abroad faster. Besides, our incentive system, where a small percentage of the value of exports are paid back to the exporters in the form of tradable scrip or duty drawback to compensate them for higher transaction and logistics costs in India, is also such that exporters prefer major EDI based ports to claim benefits under Foreign Trade Policy as they receive them faster than non-EDI ports.[2]
The Ministry of Commerce has been implementing a series of reforms based on reports by task forces that were set up to examine transaction costs and time taken to import and export. However, the “Task Forces on Transaction Costs in Exports” was primarily constituted to improve India’s DB ranking, and it worked to reduce costs and time primarily in terms of soft infrastructure. Instead, what Indian exporters require to be competitive are substantive measures in terms of hard infrastructure (three examples are better last-mile connectivity to ports, logistics facilities at container stations and improved vessel frequency) (Ministry of Commerce 2011). Moreover, the task forces replicated the problems in the methodology of DB rankings because they mainly considered export activities only in three ports: Delhi air cargo complex, JNPT and Chennai ports (Ministry of Commerce 2014). This fails to paint a comprehensive picture of India’s trade infrastructure because the facilities and connectivity of these ports are far ahead of other ports. Given that DB considers the largest business cities, TaB ranking excludes issues faced by small export-oriented firms located in smaller towns or cities. The real success of a better rank in DB reports could be seen if it brings more individuals and small and medium enterprises progressively into trade, at the same time, making trade easier for the existing ones.
Given these multiple flaws in methodology, it becomes doubly important for governments to design reforms that are not for the sole purpose of improving the country’s DB ranking. A country like India would benefit more out of implementing hard infrastructures such as last-mile port connectivity, product- or sector-specific trade facilitation, testing and certifying facilities near ports rather than reducing a few photocopies or duplication of documents. Relatively minor reforms that would improve cargo handling and reduce turnaround time in many other ports can be useful for traders. Politicians might boast of achieving higher ranks in DB, but they do so at the risk of overlooking vital flaws in methodology surveys like the DB bring.

Doing Business Rankings: Reforms Must Focus on On-Ground Realities for Trade Facilitation
Ease of doing business in India: Myths and realities

K N Ninan, JAN 12 2020, 22:50 IST
UPDATED: JAN 13 2020, 00:40 IST

Ease of doing business in India: Myths and realities

[Image: K N Ninan]
K N Ninan,
  • Jan 12 2020, 22:50 ist
  • updated: Jan 13 2020, 00:40 ist

The World Bank released its annual ease of doing business report a few weeks ago. The report entitled “Doing Business 2020: Comparing Business Regulation in 190 Economies” suggested that India had jumped 14 places (from 77th rank in 2018) to take the 63rd rank in 2019 in the World Bank’s ease of doing business ranking among 190 countries.
The government functionaries right from the prime minister down to the finance minister and others were quick to latch on to this straw and proclaim to the world and Indians as to how “well” the Indian economy is doing and that we are on course to realise the dream of a $5 trillion economy by 2024.
God knows what has happened to the other goal of ‘doubling farmers’ incomes by 2024’ about which a lot was said by the prime minister and BJP president Amit Shah during the general elections held in 2019.
According to a news release, Finance Minister Nirmala Sitharaman, citing the report, stated that India had improved in seven out of 10 indicators and has moved closer to international best practices. However, the report shows an improvement in only four out of 10 indicators. She further stated that India was on course to achieving the 50th rank and ranked among the 10 top performers for the third year in a row.
Despite the World Bank report’s rosy picture, reality speaks otherwise and points to an all-pervasive gloom about the prospects of the Indian economy and for businesses. India’s GDP, exports, production and investments in critical sectors, credit availability, employment opportunities and consumer demand is shrinking.
Rating agencies such as Fitch have cut down the growth forecast for India to 4.6% in the financial year 2019-2020 as against 4.9% by Moody’s and 5.1 % by the Asian Development Bank. If one considers the fact that the methodology to compute GDP was changed by the Modi government, India’s actual annual GDP growth rates may even be below 4 %.
Even the International Monetary Fund which had been betting high on the prospects of the Indian economy, has downgraded its expectations although it still forecasts India’s GDP at 6.1% in 2019. A National Sample Survey Organisation (NSSO) Report on unemployment which was withheld prior to the last general elections, revealed that the unemployment rate in India at 6.1% was the highest in the last 45 years.
The NSSO consumer expenditure data for 2017-18 which is being withheld as per media leaks, indicate a decline in average monthly consumer expenditure which would imply that poverty has increased after the present government came to power. If true, this would mean that poverty which has been consistently declining in India post-1991 has got reversed.
The latest available poverty data based on NSS consumer expenditure data is available only up to 2012. Statistical reports and data on different sectors which used to be regularly released to the public in the last 70 years is now being withheld or managed to hide the reality about the state of the economy.
Arvind Subramanian, former Chief Economic Advisor to the Modi Government, based on his recent study, states that the Indian economy is “now in the ICU”. Former RBI Governor Raghuram Rajan has stated that the Indian economy is in recession. Even the World Bank now concedes that “India’s cyclical slowdown is severe”.
If one reads the World Bank’s Ease of Doing Business report, especially its methodology for ranking countries based on the 10 indicators, one will be aware of its severe limitations especially in drawing inferences about the state of the business environment in different countries.
The ranking of different economies with respect to the indicators is based on a case study of a standardised business unit and covers only one or two cities in each country. For India, the report only covered Delhi and Mumbai.
How can these two cities be representative of the business environment for a large and diverse country such as India where the business environment varies from state to state. Moreover, how realistic is this standardised business unit and does it represent only large businesses?

MSME ignored
The report does not seem to cover micro, small and medium enterprises (MSME) which contributes 45% of total industrial employment, 50% of total exports and covers 95% of all industrial units in the country.
It also ignores the informal sector. The report is mainly based on a reading of the laws and regulations in respective countries and information canvassed from a survey of private sector practitioners, mostly legal experts, and government officials.
Surprisingly the survey does not cover owners of businesses who are best placed to report on the ease of doing business. There is also no information as to how these respondents were selected. Government officials will only parrot out what the regime of the day wants to hear.
Indians are well aware of the wide gap between regulations and its actual implementation. Although India has shown an improvement in four indicators - starting a business, dealing with construction permits, trading across borders and solving insolvency, for six other indicators - getting electricity, credit, registering property, protecting minority investors, paying taxes and enforcing contracts, there is no improvement.
The overall ease of doing business index computed in the report is just a simple average of the scores for the ten indicators which is questionable since it gives equal weight to all the indicators. Perhaps, the most poignant depiction of the real state of the ease of doing business in India is the sad story of a NRI businessman in Kerala who committed suicide recently frustrated with the years of delay in getting clearances from the local panchayat for his enterprise.
(The writer is an economist)

Read more at:

Ease of doing business in India: Myths and realities
Doing Business report: India ‘won’t be hit by data issues reported by World Bank’
Our Bureau New Delhi | Updated on August 28, 2020 Published on August 28, 2020

Data relate to rankings of 2018 and 2020; India not among the marked nations

India is unlikely to be affected by the irregularities reported in the data used by the World Bank to prepare the Ease of Doing Business ranking. Late on Thursday, the World Bank had disclosed issues with the data and announced pausing the publication of the ‘Doing Business’ report.
“The incidence of data irregularity relates to China, Saudi Arabia, the UAE and Azerbaijan,” a source said while making it clear that India does not figure anywhere in it.

Out of 190 countries, India stood was ranked 63 in 2020 against 142 in 2014. It has been eyeing a slot in the top 50 with stepped up reforms.
“We are not worried about the World Bank’s reported decision on taking a relook at previous ‘Doing Business’ reports as India is not one of the marked countries,” said a senior official of the Department for Promotion of Industry and Internal Trade (DPIIT).

Ranking may improve
“On the contrary, if you go by international media reports, the four countries that have been highlighted as the ones that might be affected are all ranked above India. So, if anything, India’s ranking might improve if the others rankings are lowered.”
“Since we have improved our governance and reforms, our ranking will improve automatically not just in the World Bank study but also in others such as the Global Competitive Index,” he emphasised.
“The reform process is not confined to Mumbai and Delhi (which were covered in the World Bank analysis). If we were bothered only about the World Bank ranking, we would have focussed only on Delhi and Maharashtra. However, we have made it a pan-India exercise. We do State-wise ranking on the same criteria as the World Bank,” the official further said.

World Bank reviewing data
The World Bank said a number of irregularities were reported regarding changes to the data in the Doing Business reports of 2018 and 2020, published in October 2017 and 2019, respectively.
Reiterating the integrity and impartiality of data and analysis as paramount, the World Bank said: “We have asked the Group’s independent internal audit function to perform an audit of the processes for data collection and review the last five ‘Doing Business’ reports and the controls to safeguard data integrity.” Based on the findings, it will retrospectively correct data of countries most affected by the irregularities.

Doing Business report: India ‘won’t be hit by data issues reported by World Bank’
India News › Ease Of Doing Business Has No Ground Effect, Charges Of Traders Departmental Corruption Increased, Market Stalled

'ईज ऑफ डूइंग बिजनेस' का जमीनी असर नहीं, व्यापारियों का आरोप- विभागीय भ्रष्टाचार बढ़ा, बाजार ठप

अमित शर्मा, अमर उजाला, नई दिल्ली। Updated Sun, 06 Sep 2020 06:50 PM IST


ईज ऑफ डूइंग बिजनेस में आंध्रप्रदेश के बाद उत्तर प्रदेश दूसरे स्थान पर
यूपी के बिजनेस हब गाजियाबाद और नोएडा के व्यापारियों ने कहा- देनी पड़ रही रिश्वत

'ईज ऑफ डूइंग बिजनेस' का मूल विचार व्यापारियों को व्यापार करने के लिए लालफीताशाही और भ्रष्टाचार से मुक्त वातावरण उपलब्ध कराना है। इस पैमाने पर उत्तर प्रदेश को वर्ष 2020 में दूसरे स्थान से नवाजा गया है। हालांकि व्यापारियों के मुताबिक जमीनी हकीकत इससे कोसों दूर है।

पिछले वर्ष के मुकाबले इस वर्ष यूपी ने 10 पायदान का सुधार किया है। लेकिन प्रदेश के शीर्ष व्यापारियों, बाजार संगठनों का कहना है कि प्रदेश सरकार की अच्छी कोशिशों के बावजूद जमीनी स्तर पर भ्रष्टाचार बढ़ा है। उन्हें अपना कामकाज करवाने के लिए पहले की तुलना में ज्यादा रिश्वत देनी पड़ रही है। 'ईज ऑफ डूइंग बिजनेस' का जमीन पर कोई असर नहीं दिख रहा है और यूपी के बिजनेस हब के रूप में विख्यात गाजियाबाद और नोएडा में इस दौरान कोई नया बड़ा व्यापार शुरू नहीं हुआ है।
गाजियाबाद इंडस्ट्रीज फेडरेशन के महासचिव अनिल गुप्ता के मुताबिक राज्य सरकार ने व्यापार करना आसान बनाने का काम अवश्य किया है, लेकिन जमीनी हालात यही हैं कि कारोबारियों को अभी भी अपने कामकाज के लिए विभागीय अधिकारियों को रिश्वत देनी पड़ती है। इसमें बढ़ोतरी ही हुई है। कुछ क्षेत्रों में डिजिटलीकरण के कारण लालफीताशाही में कुछ कमी अवश्य हुई है, लेकिन ज्यादातर मामलों में असर नहीं हुआ है।
कपड़ा उद्योग व्यापार संघ के उपाध्यक्ष राजीव अग्रवाल कहते हैं कि अगर 'ईज ऑफ डूइंग बिजनेस' का असर होता तो इसी दौरान क्षेत्र में नए व्यापार, फैक्ट्री या अन्य कामकाज शुरू होते। लेकिन पूरे एनसीआर में पिछले वर्ष से अब तक कोई नया कामकाज नहीं शुरू हुआ है।

बाजार में मांग कम होने के कारण कोई भी नया उद्योग नहीं लगा रहा है। पहले से काम कर रहे उद्योग भी बेहद खराब स्थिति में चल रहे हैं। राजीव अग्रवाल के मुताबिक नोटबंदी से लेकर कोरोना से पैदा हुई आर्थिक सुस्ती तक की स्थिति हजारों फैक्ट्रियों के लिए तालाबंदी की तरह साबित हुई है। पूरे देश को रेडीमेड कपड़े उपलब्ध कराने वाली अनेक गार्मेंट्स फैक्ट्रियों ने कामकाज समेट लिया है।

न के बराबर बिक रहे फ्लैट
पिछले एक दशक में दिल्ली-एनसीआर एरिया में रियल स्टेट बिजनेस इसकी मजबूत आर्थिक ताकत बनकर उभरा था। लेकिन मांग में कमी के कारण रियल स्टेट सेक्टर में भी तालाबंदी जैसी स्थिति है। एनसीआर के एक बड़े बिल्डर फर्म के शीर्ष अधिकारी के मुताबिक बाजार में मांग न के बराबर है। गिनती के फ्लैट सेल हो रहे हैं। कोई बिल्डर नया प्रोजेक्ट शुरू करने की हिम्मत नहीं जुटा पा रहा है। इस समय 'रेडी टू मूव फ्लैट' न के बराबर रह गए हैं।

अधिकारी के मुताबिक पिछली योजनाओं के फ्लैट ही किसी तरह तैयार कर बेचने की कोशिश है। अब नवरात्र, दशहरा और दिवाली का सीजन आ रहा है जब इसकी सेल सबसे ऊपर रहती है, लेकिन अभी तक बाजार में ग्राहक नजर नहीं आ रहे हैं। कोरोना काल में लोगों को अपनी नौकरियों को लेकर भारी अनिश्चितता है। यही कारण है कि लोग फ्लैट जैसी लंबी अवधि की योजनाओं में पैसा डालने से डर रहे हैं।

केंद्र सरकार ने रियल स्टेट बाजार को गति देने के लिए 25 हजार करोड़ रुपये की आर्थिक सहायता का एलान किया था, परंतु अभी तक बिल्डरों को इसका लाभ नहीं मिल पाया है। जब तक बाजार में तेजी नहीं आती और अनिश्चितता दूर नहीं होती, यही स्थिति बनी रहेगी।

'ईज ऑफ डूइंग बिजनेस' का जमीनी असर नहीं, व्यापारियों का आरोप- विभागीय भ्रष्टाचार बढ़ा, बाजार ठप


Super User
Charges Of Traders Departmental Corruption
I find most of your posts and threads biased against this particular Government. Do you think Government as some magician with a magic stick to solve all your problems.

It is not government problem if some SSI unit is not able to make profits or pay their employees. Rather these units should be fined with heavy hand for working like lazy snails and devoid Government with of taxes.

If taxes are insufficient then how will government employees get their salaries and annual aprisals. Private property and bank savings of these defaulting SSI people, who do not know how to run business should be confiscated by government. Or at least cheap land given to them by Government should be taken back and alloted to some one who can run industry in productive way.
In China they are promoting businesses and Govt work for all buainesses.
Not for Ambani or Adani only.
Goto China and establish your business in few weeks.
Not much jasslenor paperwork like India.
Indian Policy Makers only want under the table money to start a business / sme / industry.

Govt or Administration is only to churn out money from business class.
These Fools have no understanding of economy or another thing.
These Fools want to fill own pockets only.
Those running business know all this and doing with their own guts and Experience of handling all by money.
It is not government problem if some SSI unit is not able to make profits or pay their employees. Rather these units should be fined with heavy hand for working like lazy snails and devoid Government with of taxes.
Those fail to make profit can go home or do salary income from other factories or offices.

Govt can't help in such situation.
But those doing good business need support,
This is the main point where governance is fail in India at local / state / national levels.