THE National Democratic Alliance (NDA) government headed by Prime Minister Narendra Modi got a boost last week when India’s ranking in the World Bank’s Ease of Doing Business shot up sharply from 130 last year (out of a total of 190 countries) to 100, the first time the country has been ranked at that level.

Government leaders were ecstatic by the achievement, though the opposition led by the Congress appeared disenchanted and tried to ridicule the Bharatiya Janata Party (BJP).

Leaders of the two parties are now engaged in a bitter fight in the run-up to elections for two state assemblies — Himachal Pradesh and Gujarat. While voting in the hill state will be held on Thursday (Nov 9), the electorate in Gujarat will be voting only on Dec 9 and 18.

The World Bank report has come in handy for the BJP, especially in Gujarat, one of India’s fastest-growing states and one with a significant number of business- and trading-class voters.

When the Modi government came to power in 2014, India’s ranking was 142nd in the Doing Business index. It went up to 131 in 2015 and 130 last year, but there was criticism of the government for the failure to initiate radical reforms, which could have boosted its ranking.

Many government leaders, however, had claimed that the World Bank’s rankings relate to the period ending June, but many reforms had taken place in the second half of last year. This got reflected in the current ranking for India.

In fact, the Goods and Services Tax (GST), which came into effect from this July, was not taken into consideration by the World Bank while preparing the latest report. The Indian government expects the reform — which slashes inter-state trade barriers — will boost the country’s status in global reports.

The report, however, refers to lack of reforms in getting electricity and registering properties

After coming to power, Modi had declared that his aim was to catapult India into the top-50 in the Doing Business index.

Arun Jaitley, the finance minister, declared that this was doable and would be achieved soon. “In three years, we have touched 100 from 142,” he said. “And I think in those areas where we are still lagging behind, there is a sufficient amount of work in progress. There is a reason to believe that we have a capacity to further significantly improve our position.”

The Modi government’s ‘reform-perform-transform’ strategy will ensure further improvement in India’s ranking, BJP and government leaders assert.

Jaitley points out that the jump in ranking from 130 to 100 is the highest for India and also extremely significant. The NDA government has been trying to improve on all 10 parameters to ensure that international businesses can invest in the country.

The World Bank said India was among the top-10 ‘improvers’ this year and had implemented reforms in eight of the 10 ‘Doing Business’ indicators. An official of the bank said that while many countries have seen similar jumps in rankings over the past 15 years, India was the only large economy to have zoomed that rapidly.

India has all along lagged behind the other BRICS nations (including Brazil, Russia, China and South Africa), but this was the first time it overtook Brazil and emerged at the 100th position. Brazil’s ranking was 125th.

Russia topped the BRICS list at 35th position, followed by China (78th) and South Africa (82nd). New Zealand topped the list, followed by Singapore, Denmark, South Korea and Hong Kong. The United States and Britain ranked 6th and 7th.

WHILE the Congress and other opposition parties were not too enthused by India’s sharp improvement in the Doing Business index, the stock markets and business groups and chambers were ecstatic.

The Sensex, the benchmark index on the Bombay Stock Exchange, shot up by almost 400 points, scaling a lifetime high of 33,651, the day after the World Bank’s release of the rankings. The NSE Nifty on the National Stock Exchange also jumped to its record high.

Chandrajit Banerjee, the director general of the Confederation of Indian Industry, said the improvement in ranking and score will boost investor sentiment. “The report validates the commitment of the government to fast-tracking economic reforms, addressing red tape and facilitating business, which it has undertaken in mission mode over the last three years,” he pointed out.

Pankaj Patel, president of the Federation of Indian Chambers of Commerce and Industry (FICCI), noted that with the government undertaking “a spree of reform initiatives, the improvement in India’s doing business rankings come as no surprise. The reforms have been broad-based encompassing wide range of areas including taxation, finance, legal and administrative procedures”.

And according to Rana Kapoor, managing director and CEO of Yes Bank, the incremental improvement is driven by construction of insolvency architecture, leveraging digitisation and legal framework for improving tax payments and credit availability, reducing time and cost overruns for construction permits and protection of minority investors.

“I am confident that GST’s incorporation in next year’s assessment will provide another significant leap in doing-business rankings for India,” he said.

The World Bank’s report, while recognising reforms in eight sectors, referred to the lack of reforms in getting electricity and registering properties.

The areas that witnessed rapid reforms and which triggered the boost in India’s standing in the report include: starting a business, dealing with construction permits, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

“The country’s corporate law and securities regulations have been recognised as highly advanced, placing India in fourth place in the global ranking on protecting minority investors,” the report pointed out.

Of course, while the sharp elevation in global rankings in reports such as the Doing Business index helps attract more foreign funding and raises the country’s international profile, in domestic elections — especially in rural areas — it has a significantly lower impact.

The BJP government is confident of not only retaining power in Gujarat — where it has been ruling continuously since 1995 — but also taking over Himachal Pradesh in the ensuing state elections.

In state elections, however, subsidies and other measures to woo the electorate (especially the poor) play a large role, something that reports such as the latest Doing Business index do not take into consideration.

Published in Dawn, The Business and Finance Weekly, November 6th, 2017