MAKE IN INDIA - INDIA HAS A LOOOOOONG WAY TO GO
By Ruma Dubey
The ease of doing business in India. Ease and India. Do they go together? At least till now, they do not.
Yesterday, Mr.Modi, given his excellent oratory skills, made a fantastic speech on ‘Make in India’. He had all the right quips and quotes, even his focus was in the right direction. But for now, it seems like a major uphill task without any straight cut road map ahead. The goalpost is set but how do we get there, given the myriad of obstacles in the path? There has to be a way chalked around it or else how can we cheer this great speech on ease of doing business in India.
This speech made one pull out the June’13 (the most current) rankings for ‘Ease of Doing Business’ and India stands, as Mr.Modi himself said during the speech, at 134th place. There is a lot of gap between what was said and the actual ground reality.
Try setting up even a handcart for selling fruits on your own street. One would think it would be the easiest thing to do. But the nightmare which one would have to endure could put you off fruits for the rest of your life! So can you imagine setting up an industry? Ask Posco and Vedanta. They will let you know how easy it is to set up an industry here.
Why go so far? Last month, Swiss chocolate maker, Lindt, pulled out of India after two of its consignments were sent back due to non-compliance with new rules imposed by the Food Safety and Standards Authority of India (FSSAI). Their story of harassment is shameful and sadly, a perfect reflection of how things happen in India. In 2013, the company was informed via a new uidline that Lindt required to list the ingredients in descending order, based on weight or volume at the time of manufacture. Perfectly fine rule. Lindt adhered to this and sent new consignment as per the new specified guideline. When the goods reached there, Lindt was informed that chocolates with vegetable oil or fat would not be allowed. So then Lindt sent out a smaller consignment with no vegetable oil or fat. This again was not allowed as there was no mention of ‘use of artificial flavours’ on the label. Thus rules kept on changing overnight and this finally irked Lindt and it decided to close shop. When Lindt would have read ‘Make in India’ proposals, would they have laughed or smirked? Guess, they would have done both.
We have a huge population and that is our biggest strength. But if the systemic machineries do not function right, how can any rhetoric alone instill faith in foreigners to come to India. Most of them shudder to come even on a tourist visa to India!
Yes, things will change. That is the hope which Modi has raised but it will take time. Meanwhile, we can have a look at the rankings, more importantly, have a look at the points which are considered to arrive at this ranking. It is mainly reforms making it easier to do business and under this there are 10 categories:
1: Starting a business
2: Dealing with construction permits
3: Getting electricity
4: Registering Property
5: Getting Credit
6: Protecting investors
7: Paying taxes
8: Trading across borders
9: Enforcing contracts
10: Resolving insolvency
Shockingly, the report ranks India at 172 when it comes to starting a business, 94 when it comes to registering property, 127 for trading across borders. For starting a business, it has listed 12 procedures, takes 27 days if all your papers are in order , costing some 50% of income per capita.
Not surprisingly, India ranks right at the bottom, 182nd rank when it comes to dealing with construction permits. A company, to set up business, needs to complete 34 procedures or permits while Hong Kong needs only 6. And in terms of days taken to get the permits, India needs 196 days, Singapore scores the best at 26 days while Haiti comes at the bottom at 1129 days. But the good news here is that India reduced the time required to obtain a building permit by establishing strict time limits for preconstruction approvals, which is why it is at least 196!
In terms of getting electricity, Iceland is the easiest and most difficult in Bangladesh. In India, there are 7 procedures to deal with and takes 67 days. For registering property, India has 5 procedures and takes 44 days. For ease of paying taxes, there are 33 payments per year, taking 243 hours per year and the total tax rate comes in at 61.8% of the profit earned. India’s worst performance is in terms of enforcing contracts, where a company has to comply with 46 procedures and it takes 1420 days.
One can sit and wonder the need to have this index. But in today’s time where Govt is banking its entire economy on FDI, this index and India’s ranking on this index holds immense significance. This index is like a mirror, showing the Govt its own face, where improvement is needed and where a complete makeover is required.
For more details, one can read through the entire report for more insight: http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Annual-Reports/English/DB13-full-report.pdf
PS: Label it a gaffe or anything but its a telling sign - the USB flashdrives containing the electronic version of the "Make in India" brochure, distributed to all, was made in China!