India’s ranking on the World Bank’s ease of doing business improved by 12 spots in its 2016 rankings. India now ranks 130 out of 189 countries.
Speaking to CNBC-TV18’s Shereen Bhan, Onno Ruhl, Country Director, World Bank, said that reforms in India pushed its ranking upwards. “India is among the one-third countries that have improved,” he said.
The World Bank also revised India’s 2015 rank from 142 to 134 due to data and methodology revision used to calculate the rankings, he said.
Ruhl said reforms like simplification in pre-registration and registration charges required at the time of setting up business, doing away with minimum capital requirements and making approvals for electricity easier worked in the country’s favor.
World Bank has a positive outlook on India, Ruhl said. However, the country needs to work upon policy loopholes, e-filing and e-taxation.
Below is the transcript of Onno Ruhl’s interview with CNBC-TV18’s Shereen Bhan.
Q: Let me start by asking you to clarify. Is it a jump of 12 places, is it a jump of four places because that is where a lot of the confusion rests at this point of time. You have changed the methodology as far as your 2015 ranking is concerned which that takes India to the 134th position and if you then compare that to your 2016 ranking it is only a difference of four places and not twelve?
A: The way I look at it is last year we issued a report in which India was ranked 142 and this year, we are issuing a report in which India has ranked 130. And the most important thing to take away from that is actually two.
Firstly, the trend of a number of years of decline has been reversed and secondly, that India has made a good start to what we hope is a sustained period of increased ranking similar to what Russia has done in the past where over four years it moved from 142 to 51. The first year Russia moved only three places. So, whichever way you look at it, it is a good start.
Q: But there is a big different between 12 and 4. So, how should we read this? Is it 12 or is it 4?
A: To me, it is 12 because I just read the report one year and then I read it the next year.
Q: But you have changed the methodology for 2015. So, our ranking has actually improved even in 2015, hasn’t it? As per your own report.
A: Yes, but I don’t know what it actually means to rank one year back. So, to me there is a methodological debate. India itself has always been arguing that we needed to keep improving the methodology. We have listened to that thing including India’s appeals.
So, we are trying to get better at how we rank this but this year it is 130. The bottom line is India is only one third of the countries that has even improved at all and India has made to really important reforms. On top of that we already know that in these five other areas India has done reforms after the cut off period of this report which was May 31. So, the outlook looking forward is even more positive.
Q: How probable is it that we could possibly see that jump to the number 50 position which is what the governments aspiration is over the next two years? You were giving us the Russia example, you have said that the report doesn’t factor in several of the reforms that have already been undertaken by this government. So, how confident should we feel about the governments aspiration of getting to number 50?
A: I think it is a realistic goal, I have said that before. I am not quite certain if two years is the realistic timeframe. It took Russia more like four to five years because it is a lot of work and some of these areas take time to come through but it is a realistic goal.
I really feel that the government both the central government, the Maharashtra government and the Delhi government are very focused on reaching that goal.
Q: Let us talk about the details as far as the ranking is concerned and we can see significant improvements as far as starting a business is concerned where India is now ranked at 155 versus 164 and the second improvement where we are seeing a significant difference as per your study is electricity where India’s rank has gone to 70 versus 99 last year. So, these are the two categories that have really pulled up the overall ranking, isn’t that true?
A: That is absolutely true, I really want to emphasize that the provision of the Companies Act which happened in less than six months is a major step. I personally never seen a Companies Act revised in a time period of only six months. Then also the efforts both in Mumbai and Delhi to make it easier to get an electricity connection have really paid off as you said.
Q: Let us talk about where we haven’t really seen improvement or actually we have declined, minority investor protection India status quo ranked 8th last year, 8th this year. Paying taxes we have actually declined a point, we are now at 157 versus 156 and where we have actually seen no change at all is enforcing contracts where again we are status quo – 178 this year versus 178 last year. Do you feel confident that we are perhaps going to start to see some improvement in these areas on the back of what you are seeing in terms of policy changes?
A: Protecting minority investors India is number 8 in the world, that is absolutely world class. It is essentially impossible to go up from there because India is really doing very well. So, we don’t expect any significant change from world class performance.
In terms of dispute resolution, the key is that in fact some very encouraging steps have been taken since. In Maharashtra commercial court law benches have been notified, they will need to start operating. If they start operating which we fully expect in the near future that will mean improvements for next year’s ranking.
The same is happening in Delhi and there is also work under way to digitise, to use technology to speed up the court process. This is extremely important because this is an area where India historically has done badly and therefore we are very encouraged about the steps.
Similarly paying taxes, we already know that e-filling and e-payments has been made possible and will become the practise. We are therefore confident that there will be improvement in next year’s ranking. Therefore I keep emphasising that the improvement this year is only a first step, lots of efforts are under way.