Good business: World Bank gives India a ranking boost – and indicates how much remains to be done

In an achievement that boosts the Modi government and more importantly increases India’s attractiveness for investors, the country has been placed 77 in World Bank’s global ease of doing business ranking this year. This amounts to a cheerworthy 65 rank leap since 2014. Of the 10 metrics tracked for this ranking, India improved on six this year. A closer look at the data gives both a sense of the areas of great potential for improvement, and the challenges therein.

For these rankings World Bank surveys 190 countries. Over the last four years, on the ease of getting an electricity connection, India has climbed from rank 137 to 24. Likewise there has been an impressive leap from rank 184 to 52 on construction permits. On starting a business, the country now stands at 137, a 21 rank gain. On trading across borders India is now placed at 80, up from 146 a year ago on the basis of reducing the time and cost of importing and exporting, through measures like digitalisation and upgrading of port infrastructure.

But reality check: Against a backdrop of an escalating trade war between the US and China it is countries like Indonesia, Vietnam and the Philippines that seem to be walking away with the trade diversion gains, as a policy of pushing up import tariffs has been undermining India’s attractiveness. Since modern trade is built upon the exchange of intermediate goods across international supply chains, protecting one industry via import tariffs tends to damage others, increasing cost if not difficulty of doing business.

A district-level ease of doing business rankings is in the works and that will help counteract one notable limitation of the World Bank survey, that it is based on feedback from just Mumbai and Delhi. Also, if India is racing ahead so are its competitors. If India advanced 23 places this year, China has shot up 32 places to be among the global top 50 and rub shoulders with OECD nations. China is India’s large Asian neighbour which uses its outsized economic heft to block India’s rise – hence China is the competitor India must benchmark itself against. Put another way, Prime Minister Narendra Modi declared India’s goal to be to break into the top 50. That’s where India must head, for which there is much scope for reform.