Incremental reform in a democratic country with a deserved reputation for fierce contestation among various groups and individuals over everything under the sun is probably the only way ahead. The so-called big bang reforms are just not feasible, and as the NDA ministers counter, will someone stand up and list what those big bang reforms are supposed to be? Given that there has been an incessant flood of scary headlines in recent days, it was natural for morsels of good news to be lost in our collective obsession with peripherals. But when the World Bank, no less, acknowledges that India has moved up 12 notches on the ease of doing business, it must be said that the Modi Government is doing something right after all.
Notwithstanding the current headlines about beef and cow and everything connected with it, the Prime Minister has been quietly engaged in smoothing the way for Indians and foreigners alike to make it in India. Needless laws and stipulations, unfriendly conditions, intrusive and fruitless inspections, in-built delays et al have come in for a serious review since the advent of the NDA Government in May last year. Yes, nothing changes, especially in a big and highly diverse country like India, overnight. But attacking red tape and curbing the power of the lower bureaucracy to delay and obstruct business was always going to be welcome. Modi has cut down red tape, reduced the time for grant of mandatory sanctions, increased the use of online applications and sanctions by relevant agencies in order to drastically cut down the time it takes to roll out a new enterprise. Improving the regulatory environment was the focus and in this direction a lot has indeed been done.
Getting power connections for new enterprises in Mumbai and Delhi has become far more easy now than at ever before. It may be due to the fact that power distribution in both cities is in the hands of private parties which have successfully cleaned up their own operations to make them user-friendly. It is remarkable that the number of days it takes to start a business in India now is down to 29 from 127 in 2004. Of course, a lot more needs to be done before India can move up from a still dismal 130 among 189 countries to a half-respectable 50-60 range. That is an ambitious target but as Kaushik Basu, the chief economic adviser of the World Bank, said if the determination and sustained effort shown by the Government in the last one year continues, India could hope to see substantial improvement in the coming year. Notably, China, despite its one-party, authoritarian system, is ranked at 90 even after moving six places in the year under review. Pakistan, incidentally, is at 138. Among the key measures that helped India move up was the elimination of the earlier requirement of a minimum paid-in capital and a certificate from the relevant authority before starting business operations.
However, the WB report noted that access to credit had become relatively difficult in the year under review. The report could not have mentioned the real reason why that was so but given the humongous burden of non-performing assets of the banking sector it was natural for the new regime to advise caution on fresh funding for new enterprises. What was unsaid was the fact that under the previous government huge loans were sanctioned without due diligence on the intervention of the political executive or its agents, a big factor in saddling the taxpayers with several lakh crores of bad debts. Indeed, the top ten debtors account for some 80 percent of the total NPAs, and these are all well-known industrial houses. Therefore, if there has been a slowdown in bank credit to the industrial sector it ought to be welcome. Without proper due diligence not a rupee should be released to anyone. Meanwhile, the Government has also moved to meet a key lag in the business environment by proposing a sound bankruptcy law. This should help unviable businesses to wind down operations without getting bogged down in prolonged red tape and other hassles. Again, the sure but steady reform of the crippling labour laws in order to make them both employer and employee friendly has been undertaken by various State governments. All in all, despite diversionary noises, the Prime Minister has truly put his shoulder to the wheel to make the country enterprise-friendly. Without enterprise, you cannot expect to grow at nine to ten percent, which is absolutely necessary for banishing poverty from the land.
