Here’s tangible proof of minimum govt, maximum governance

In this winter of our discontent — as we try and cope with a toxic smog enveloping the northwest, declining growth, job losses and a cumbersome GST — there is finally some good news that should lift our spirits. India has risen 30 places in the World Bank’s global ranking in the Ease of Doing Business (EoDB). More significantly, it has improved on all 10 criteria — no other country has achieved this.

Reading this report alongside the study by IDFC/Niti Aayog based on an enterprise survey of over 3,200 companies, gives tangible grounds to believe institutional reforms on the ground have finally begun. This is the first tangible proof of Narendra Modi’s promise of ‘minimum government, maximum governance,’ and in upgrading India’s rating, Moody’s has also underlined that only through institutional reforms will India realise its potential.

India is a bottom-up success; China is a top-down success. A purposive Chinese state has built the most amazing infrastructure at breakneck pace and converted China into a middle-class nation within a generation. India’s is a story of private success and public failure–its rise is due to its enterprising people rather than the state. Our red tape and bureaucracy breaks the spirit of small and medium enterprises that create the most jobs. The World Bank has been pointing this out for 15 years but every Indian government till now has ignored the EoDB, preferring instead to pick holes in its methodology.

This is the first government that has taken EoDB seriously, according to the World Bank. When Modi set a target to reach rank 50 from 142, everyone thought it was a pipedream; it now appears achievable. Our success is due mainly to the gradual shifting of state-citizen interface online; the second reason is the competitive spirit engendered between states. Once glitches in the GST and the insolvency law are overcome India’s ranking should improve further.

In the states assessment, Andhra/Telangana share first place, followed by Gujarat, Chhattisgarh, Madhya Pradesh. The five worst performers are Delhi, Kerala, Assam, Himachal and Tamil Nadu. The IDFC report confirms that states with improved EoDB have been rewarded with higher growth.

The greatest indictment is of the Indian judiciary. India still ranks among the lowest in the world in the time taken to enforce contracts. Business depends critically on settling disputes between buyers and sellers but India still lacks district commercial courts manned by judges with commercial training; nor, do we employ e-courts, allowing judges to read documents on-line prior to hearings and thus speeding judgements. Contract enforcement in China takes less than one-tenth of the time as India.

EoDB is a great corruption fighter. Anna Hazare and Arvind Kejriwal were so obsessed with the Lokpal Bill that they did not realise that EoDB would do far more to eliminate corruption. Corruption is like malaria — you need to clear the swamps to prevent it. Lokpal is like quinine — you take it after you have fallen sick. It is better to prevent corruption than to catch crooks. Not surprisingly, the top ten EoDB countries have little or no corruption, but they also have a lokpal-type ombudsman to make high officials accountable.

EoDB can improve the aam aadmi’s life. The same process change that reduced the time to issue a construction permit by Delhi’s municipality (MCD) has also resulted in reducing the number of days to get a birth certificate. Renewing your driver’s licence in Delhi now requires half an hour without a pay-off and you receive the new licence by post within a few days.

At rank 100, India still has a long way to go. The IDFC report has highlighted many gaps between intent and reality. Most enterprises are still not aware that their states offer single-window clearance. Employment-intensive sectors still have to put up with corrupt labour inspectors. Land acquisition is mired in red tape. It is a reminder to the government to pass the pending labour and land acquisition bills as soon as it has majority in the Rajya Sabha.
But imagine if we had implemented the EoDB reforms in 1991! India would be twice as prosperous today with far less corruption.

The cost of this delay is a tragedy, reminding us that India’s socialist era which claimed to deliver growth with social justice, delivered neither. When Shakespeare said in Richard III, ‘Now is the winter of our discontent/Made glorious summer by this son of York’, he was suggesting that the time of unhappiness is past. I wish we could say that about our country. Only when our economy’s growth rate crosses 8% and jobs come in droves will ‘achhe din’ truly arrive. Meanwhile, this is a great step forward.