Let146;s get down to business

While the improvement by 12 positions is a source of moderate comfort, it is a matter of continuing concern that despite our proclaimed economic successes we rank with the bottom third of the countries surveyed. We need to focus on our weaknesses to sustain private investment and attract external flow.

However, we have made notable progress in two areas. First, in trading across borders. There is significant improvement in customs clearance, the time taken, and the procedures. This should give the Central Board of Excise 038; Customs some satisfaction, for the report improves public perception in an area that was some time ago considered an embarrassment.

Second, in ease of getting credit for business. Notwithstanding complaints about harassment by banks, we are obviously doing better than many other countries.

The five areas we need to focus on are:

8226; Enforcing contracts: It8217;s quite shameful that we are at rock bottom, being ranked 177th out of 178 countries. The report says enforcing a contract takes on average 46 procedures, 1,420 days, and eats up 39.6 per cent of the cost of the claim. Clearly, legal reforms are yet to begin.

The report suggests special commercial courts, streamlining of the appeals procedure, hastening judgment, decreasing the cost of litigation, and introducing e-courts and case management. This needs tangible action.

Given the widely acclaimed independence of our judicial system, we need to recognise that old ways and outdated rules, regulations, and procedures do not meet contemporary needs.

8226; Paying taxes: We have been ranked 165th. The report says the number of tax payments a business has to make per year is 60 and this takes up 271 hours. It says a business ends up paying 70.6 per cent of its profit as taxes. The report has included all Central and state government taxes that a business may have to pay, including vehicle tax and road tax. But it does raise the question whether India is an overtaxed country.

I thought our reforms had succeeded in the areas of tax administration and introducing moderate taxes. I8217;m sure we would have been ranked much worse before the mid-1990s but clearly there8217;s a need to improve.

Given extreme poverty and the need for large public outlays on poverty alleviation, the social sector, and infrastructure, there8217;s always a need to retain taxation. But we need to consider whether we should rank so low in large cross-country comparisons.

8226; Closing business: We rank 137th because the report estimates that time taken to close a business is 10 years, the recovery rate is a mere 7.6 cents per dollar invested, and the cost as percentage of the estate is nine per cent. This is not surprising, because, notwithstanding various specialised legislations, the absence of flexible labour regulations mitigates against a credible exit policy.

8226; Starting a business 038; dealing with licences: On these two parameters we rank 111th and 134th respectively. In terms of procedures, cost, and time involved we are worse than international averages. Clearly the uneven practices across ministries and states remain serious handicaps.

In a complex system of decision-making like ours, even a small success is worthy of celebration. While a nominal increase in our rating deserves recognition, we must realise that we have a long way to go.

The World Bank and International Finance Corporation report is not the only one to highlight our multiple weaknesses. There is need for a concerted, proactive strategy. Leaving it to market forces or the willingness of few policy makers, stymied by coalition compulsions, is clearly less than adequate.

Complacency in a milieu of economic euphoria can prove costly. Can we set a target? For instance, that in the next two years we would improve our ranking from 120th to 60th?

It8217;s not easy to ease the doing of business.