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Is doing business in India really easier now?

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Ease of doing business

Prime Minister Narendra Modi’s efforts in building India’s global appeal for investors seems to have finally yielded returns in terms of the country’s performance in the World Bank Doing Business rankings. India witnessed its highest-ever jump of 30 places in the rankings, reaching the 100th place among 190 countries. Subsequently, it also joined the list of top 10 improvers for the first time and became the first South Asian country to achieve the feat.

The World Bank measures this in terms of a Distance to Frontier (DTF) metric, which shows the distance of the economy from the best performer in each category on a scale of 0 to 100, with the latter representing the frontier. India has shown a drastic improvement of 4.71 points over the last year from 56.05 to 60.76. To put things in perspective, China has witnessed an increase of 0.40 points.

India’s performance has been impressive by any standard. It has moved closer to the global standards in nine of the ten parameters on which the Doing Business rankings are based and has enforced reforms in eight of these categories over the last year. The three key reforms among these were resolving insolvency, ease of paying taxes online and protection of minority investors. Despite these improvements, the general sentiment has been to dismiss the rankings mainly for the flaws in its methodology.

First, the rankings are based on perception surveys of few entrepreneurs or professionals based on questions that are mostly subjective in nature. Second, they are not even based on the economic conditions of the entire economy but on one or two cities within a nation. For India, it is based on Delhi and Mumbai alone. However, the critics miss the point.

If India performs poorly even on such a limited study that chooses the best cities in the country, it speaks volumes of the business conditions across the country and is indicative of the scope of improvement that remains. Moreover, rankings are relative by definition and since the World Bank chooses a maximum of two cities for other countries as well, it should depict a near accurate performance of any country on a relative scale. Therefore, any improvement up the ladder cannot be summarily dismissed.

Further, reforms considered by the World Bank include a mix of central and state initiatives. Passing of central legislation like the Insolvency and Bankruptcy Code, 2016, that helped India jump from 136 to 103 in the “resolving insolvency” parameter have pan-India benefits and are not just limited to Delhi and Mumbai. Therefore, it would be incorrect to presume that merely focusing on a few cities is disassociated from reality even though the actions of state governments are not reflected.

Incidentally, India performs poorly in parameters where state government interference is maximum: Getting an electricity connection, starting a business and registering a property. This underlines the importance of policy coordination between the states and the Centre. Nevertheless, credit needs to be given where it is due for an improvement in rankings majorly driven by reforms undertaken by the central government over the last few years. It must be noted that the rankings have not taken into account the implementation of the Goods and Services Tax (GST). Therefore, considerable potential remains for further improvement.

But it should also be kept in mind that these rankings are not an end in themselves and are far from perfect. A lot of it is based on policies which are on the books and do not necessarily capture the real experiences on the ground. After reforms are initiated to ease the business environment, the main task of implementation begins where the real problems emerge. For instance, the World Bank applauded India’s efforts at increasing access to credit with the adoption of a new insolvency and bankruptcy code. However, the parameters fail to recognise the problem that India is going through one of its slowest phases of credit growth and that banks are wary of lending so easily.

Moreover, a lot more parameters, apart from the ones considered in the Doing Business rankings, need to be considered to understand the business environment in India. The country’s dismal performance in the Heritage Foundation’s Index of Economic Freedom (in which it is ranked 143, below most of its South Asian neighbours) and Transparency International’s Corruption Perception Index (ranked 79th), reflect the areas that the country still needs to improve upon to better the business environment.

Therefore, the chest-thumping around the Doing Business ranking improvements needs to be seen in conjunction with these factors and worked upon to ease the problems faced by common businessmen. A premature celebration can be counter-productive.

(Amit Kapoor is chair, Institute for Competitiveness, India. The views expressed are personal. He can be contacted at [email protected] and [email protected] Chirag Yadav, senior researcher, Institute for Competitiveness, India has contributed to the article)

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Key Indian equity indices open in green

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SENSEX-

Mumbai, June 21: Taking a cue from global markets, the key Indian equity market indices on Thursday opened higher.

The Sensitive Index (Sensex) of the BSE, which had closed at 35,547.33 points on Wednesday, opened higher at 35,644.05 points.

Minutes into trading, it was quoting at 35,631.42 points, up by 84.09 points, or 0.24 per cent.

At the National Stock Exchange (NSE), the broader 51-scrip Nifty, which had closed at 10,772.05 points on Wednesday, was quoting at 10,798.80 points, up by 26.75 points or 0.25 per cent.

Broadly positive global cues had lifted the key Indian equity indices on Wednesday and according to analysts, banking, metal and auto stocks witnessed healthy buying activity.

The Sensex was up by 260.59 points or 0.74 per cent at the Wednesday’s closing. In the day’s trade, the barometer 30-scrip sensitive index had touched a high of 35,571.37 points and a low of 35,329.51 points. The Nifty, too, was up by 61.60 points or 0.58 per cent.

On Thursday, Asian indices were showing mixed trend. Japan’s Nikkei 225 was quoting in green, up by 0.79 per cent, while Hang Seng was down by 0.07 per cent, and South Korea’s Kospi was down by 0.29 per cent. China’s Shanghai Composite index was trading in green, up by 0.40 per cent.

Overnight, Nasdaq closed in green, up by 0.72 per cent while FTSE 100 was also up by 0.31 per cent at the closing on Wednesday.

IANS

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AI’s 76% stake sale plan crashes, other alternatives to be evaluated

We ran a disinvestment process, where we made it very clear what type of bids we were interested in receiving… We asked certain type of bidders with certain bidding criteria to participate.

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Civil Aviation Ministry

New Delhi, June 20 (IANS) The Central government has said that a 76 per cent stake sale process of the national carrier Air India has ended, as “no interest” was shown by bidders, however, it remains committed to the strategic divestment for which other alternatives will be evaluated.

“We ran a disinvestment process, where we made it very clear what type of bids we were interested in receiving… We asked certain type of bidders with certain bidding criteria to participate,” said Minister of State for Civil Aviation Jayant Sinha.

“No body expressed any interest during that process. So just by that set of those circumstances it is clear that that process right now is over… We have to move forward and we have to consider other alternatives, now as market conditions as industry circumstances change, we will evaluate all those alternatives but that particular specific process for the moment has come to an end, if need be, we can restart that or any other process depending upon the appropriate market circumstances.”

However, the government clearly stated that it is still committed to the idea of Air India’s strategic divestment.

Sinha added: “The government is committed to strategic disinvestment, what the modalities are and the circumstances are, we will have to monitor and evaluate as we go along.”

According to the Civil Aviation Minister Suresh Prabhu a few days back the Empowered Group of Ministers set up to look at the — Air India Specific Alternate Mechanism — reviewed the situation.

The minister, who holds the charge of the Ministry of Commerce and Industry said: “… Because there was no interest we have decided to review the situation soon. In the meantime to ensure that Air India runs properly a plan is being prepared by the Air India management to ensure that AI continues continues operate efficiently.

On May 31, the Ministry of Civil Aviation said that “no response” was received even during the extended submission deadline for the ‘Expression of Interest’ (EOI) bids under Air India’s divestment process.

“As informed by the Transaction Adviser, no response has been received for the Expression of Interest floated for the strategic disinvestment of Air India,” the ministry had said in a tweet.

“Further course of action will be decided appropriately.”

The government on May 1 had released a detailed document on clarifications sought by interested bidders regarding the divestment process.

The clarification document outlined that net current liabilities as Rs 88.16 billion (Rs 8,816 crore) and “these will remain with AI and AIXL (Air India Express) as these have been incurred in the course of business.”

“After deducting Rs 88,160 mn from Rs 333,920 mn, the remaining figure of INR 245,760 mn is the debt and liability quantum that will remain with AI and AIXL.”

As per the old timelines, the submission deadline for the EOI bids was earlier extended to May 31 and consequently, the date for the “intimation to the Qualified Interested Bidders” — QIB — which was supposed to have been the next stage was slated for June 15.

It was expected that by August-end, the government will be able to determine the highest bidder.

On March 28, the government had issued a Preliminary Information Memorandum (PIM) inviting ‘EOI’ for the strategic divestment of AI, along with the airline’s shares in AIXL and AISATS (Air India SATS Airport Services) from private entities including the airline’s employees.

The Central government owns 100 per cent equity of Air India. In turn, the airline holds full stake in Air India Express, while it holds 50 per cent stake in the joint venture AISATS.

Accordingly, it has been planned to divest 76 per cent government stake in AI, 100 per cent in AIXL and 50 per cent in AISATS.

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Global cues lift equity indices; Sensex ends over 200 points higher

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Sensex

Mumbai, June 20: Broadly positive global cues lifted the key Indian equity indices on Wednesday, with the barometer Sensex of the BSE closing with gains of more than 200 points.

According to analysts, banking, metal and auto stocks witnessed healthy buying activity.

At 3.30 p.m., the wider Nifty50 of the National Stock Exchange (NSE) provisionally closed at 10,772.05 points, up 61.60 points or 0.58 per cent from the previous close of 10,710.45 points.

Similarly, the Bombay Stock Exchange (BSE) Sensex, which had opened at 35,329.61 points, closed at 35,547.33 points (3.30 p.m.) — up 260.59 points or 0.74 per cent — from its previous session’s close of 35,286.74 points.

The Sensex touched a high of 35,571.37 points and a low of 35,329.51 points.

The top gainers on the Sensex were Reliance Industries, IndusInd Bank, Vedanta, Tata Steel and Yes Bank whereas ONGC, Coal India, ITC, Wipro and Larsen and Toubro (L&T) were the major losers.

On the NSE, Reliance Industries, IndusInd Bank and Tata Steel were the highest gainers while UPL, Hindustan Petroleum and Indian Oil Corp lost the most.

IANS

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