India’s ranking in the latest edition of the World Bank’s ease of doing business index has surged 30 places to 100 among 190 economies — marking a considerable improvement from 130 last year. Clearly, efforts mounted by the government over the last year or two have paid off, with India, one of the top 10 improvers this time, implementing 33 regulatory reforms that make it easier to do business. The World Bank’s quantitative indicators seek to measure 11 areas of business which relate to reforms to create jobs — such as starting a business, registration of property, dealing with construction permits, getting electricity, protection of minority investors, paying taxes, enforcing contracts and resolving insolvency. Where India has made strides is in resolving insolvency through a new law, an improvement in the rules related to businesses paying tax and access to credit besides protection of minority investors.
But, in the current context, what is important is the revival of demand. Businessmen and industry are not investing, not because of the micro regulatory regime or the business climate, but because demand is still weak. This is not to discount the continuing efforts of the government to make it easier to do business. But in this case, the proof of the pudding will be a revival of private investment.
