Modi’s Battle Against India Red Tape Slowly Starting to Pay Off

  • India gains 12 spots to 130th in ease-of-doing-business rating
  • Foreign direct investment on pace to hit record high this year

Indian Prime Minister Narendra Modi’s moves to make life easier for companies are starting to bear fruit even if he remains far from his goal of breaking into the world’s 50 top business-friendly economies.

The World Bank ranked India 130th out of 189, compared with 142nd last year, in its annual Doing Business report released Tuesday. The country’s prospects for further improvements are good, with the Washington-based organization citing several reforms under way that weren’t finalized before the June deadline for collecting data.

“Fostering an environment more supportive of private sector activity will take time,” the World Bank said in the report. “But if the efforts are sustained over the next several years, they could lead to substantial benefits for Indian entrepreneurs — along with potential gains in economic growth and job creation.”

Upon taking office about 18 months ago, Modi made the ranking a benchmark of success at reducing India’s notorious red tape, which has frustrated both local and foreign investors for years. He’s now starting to attract more foreign investment, as India’s growth rate tops most other major emerging markets even as it remains below potential.

Record Pace

India saw $9.5 billion in foreign direct investment from April to June, up 31 percent over the same period a year ago. That has Modi on pace to set a record in the fiscal year through March, topping a previous high four years ago.

India owed its better score in the World Bank rankings to improvements in starting a business, which now neither requires any minimum capital deposit nor a certificate to start operations. The country also made it easier to get electricity, with companies in Mumbai able to connect to the power grid two weeks earlier than before.

Modi has also pushed the country’s states to step up efforts to make India a simpler place to do business, with the World Bank assessing their progress this year for the first time. The results, published last month, place Modi’s home state of Gujarat at the top, followed by Andhra Pradesh and Jharkhand, one of India’s poorest states.

Measures under way that were too late to factor into the rankings included a single application for new firms and a single-window system for building-permit applications, the bank said. While India is in the top 10 nations for protecting minority investors, it ranks 183rd in dealing with construction permits and 178th in enforcing contracts.

In the region, India trails neighbor Bhutan, which ranks 71st, and Sri Lanka, at 107th. Singapore topped the list for the 10th straight year.

Source : Bloomberg


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