Ease of Doing Business Rankings Show No Political Leverage
Politics should not come in the way of a harmonious relationship, in the context of key economic issues.
The latest Ease of Doing Business Rankings has come at the right time for PM Modi.
In recent times, the PM has been under fire for his mismanagement of the Indian economy (especially, the implementation of the Goods and Services Tax, confusion with regard to multiple rates and the failure of demonetisation to achieve its stated goals).
Not just opposition leaders, but even Yashwant Sinha a senior leader of the BJP, and former Finance Minister has been critical of the government’s handling of the economy.
Sinha wrote a scathing column, 'I need to speak up now' (27 September 2017), in the Indian Express, which drew a lot of attention, compelling the PM to not only respond to criticisms, but also make some tweaks to the GST, some of them aiming the Gujarat state elections in December.
The revisions included the reduction of GST on Gujarati savouries from 12 percent to 5 percent. Additionally, exemptions were also granted to yarns used for nylon and polyester, viscose, rayon and man-made fibres, with an eye on textile hubs in the state.
According to the latest report, Doing Business 2018: Reforming to Create Jobs by World bank, India has moved 30 slots higher from 130, among the 190 countries evaluated in 2016, to the 100th position. The Indian PM, who is an astute politician, is likely to use these rankings to bolster his party’s chances in the upcoming state elections of Himachal Pradesh and Gujarat.
Traders in Modi’s home state of Gujarat have been hit by GST, to the degree that the Congress Party senses a chance of wresting power from the BJP after 22 years – though currently, BJP still seems to be the favourite.
Reforms: A Continuous Process
If one were to specifically look at the rankings there is no doubt that even previous governments led by Dr Manmohan Singh and Atal Bihari Vajpayee carried out stellar reforms, deserving credit for focusing on 'Cooperative Federalism' as well as ‘Competitive Federalism’ and laying a greater emphasis on state participation in economic and foreign policy.
If one were to look at the details of the report, there are some interesting aspects.
This study focuses on the cities of Mumbai (Maharashtra) and New Delhi.
While Maharashtra is run by a BJP Government, New Delhi is administered by the Aam Aadmi Party (AAP) with AAP and the Modi government not sharing the best of relationships.
The Deputy Chief Minister Manish Sisodia however clearly stated that the AAP government deserves credit. “In the last two years, doing business has been easier in Delhi. Getting an industry licence has been simple with online facility and applicants can get the licence within a day,” Sisodia said.
Out of the city wise rankings, there were cities administered by three non-BJP, ruled states. Ludhiana (Punjab) ranked number 1 is ruled by the Congress, Hyderabad (Andhra Pradesh) ranked number 2 is ruled by the TRS (Telangana Rashtra Samiti), Bhubaneswar the capital of Odisha is ruled by the Biju Janata Dal.
What Do The State Rankings Indicate?
While the current government deserves credit for encouraging states to up their game, and such rankings do incentivise states to move in the direction of reform.
Yet the results also send two other clear messages. First, the ecosystem and entrepreneurial sense matters. Second, good governance is clearly not the monopoly of any one party.
The perfect instance of ecosystem mattering are Bangalore and Hyderabad, foundations for which were laid by previous governments, and successive governments have done nothing to tamper with them.
If anything, it is often said that Bangalore and Hyderabad will do well irrespective of the ecosystem. Similarly, Ludhiana in spite of facing numerous problems, has ranked high due to the entrepreneurial spirit of Punjabis in general, and the residents of Ludhiana in particular.
Increase of Trading And Business in The Eastern States
In terms of good governance, while BJP-ruled states claim credit, Odisha where the BJP is trying to expand has obviously got something right.
Bhubaneswar, which was ranked number 3 in the city-wise Ease of Doing Business rankings was 5th in terms of starting a business, while it was number 1 in trading across borders. In terms of enforcing contracts and resolving insolvency, the city was ranked 5th.
The capital of Odisha was ranked number 17 in terms of registering property. The fact that Odisha is serious about reforms is clearly evident from the point that in July 2017, the state government decided that 15 services, required for various clearance certificates for setting up projects in Odisha would go online by the third week of August.
Even in the state-wise Ease of Doing Business Rankings, the Eastern Indian state was ranked high in 2015 (7), though it witnessed a drop in 2016 (11). Chief Minister of Odisha had clearly stated, that he wanted his state to be in top 3 states in terms of Ease of Doing Business.
I would like our state to be ranked amongst the top three states in the country with respect to Ease of Doing Business. All concerned departments must learn from the good practices implemented by other states and expedite implementation of reforms, Patnaik said at a recent meeting on Ease of Doing Business.Naveen Patnaik, Chief Minister of Odisha
A Lesson in Rankings
In conclusion, it is important for the Modi government to work closely with state governments. Politics should not come in the way of a harmonious relationship, in the context of key economic issues,between New Delhi and non-BJP state governments.
Apart from this, the achievements of states like Odisha in terms of introducing important economic reforms should be highlighted and showcased, just as the achievements of BJP-ruled states are.
(Tridivesh Singh Maini is a New Delhi-based Policy Analyst associated with The Jindal School of International Affairs, OP Jindal Global University, Sonipat. This is a personal blog and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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