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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)

Business

Petrol costs Rs 82.44/litre in Delhi, Rs 89.80 in Mumbai

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Petrol Price

Sep 22 : Fuel prices climbed to fresh highs across the metros cities on Saturday as in Mumbai, where the fuel cost is highest due to the highest VAT, petrol prices inched up to the psychological Rs 90 a litre-mark and sold at Rs 89.80 per litre.

In the national capital, petrol was sold at Rs 82.44 per litre, up from Rs 82.32 per litre on Friday, data on the Indian Oil Corp’s website showed.

As per rates released daily by state-run Indian Oil Corp, the depreciating rupee and expensive crude oil further pushed petrol and diesel to new record highs on Monday.

Fuel prices in the country have been rising almost daily since August 1. They fell only once on August 13 and have been on record levels for over two weeks now.

Sector experts say a weak rupee and high excise duty are major factors for the rise in fuel prices.

Inflationary risks along with broadly negative global cues depressed the Indian rupee to a new low of 72.91 against the US dollar.

Also, high global crude oil cost has become a major concern for the country, which imports over 80 per cent of its oil requirements. The UK Brent crude oil price hovers around $78 per barrel.

Since the start of the calendar year, the petrol price in Delhi has gone up by over 15 per cent from Rs 69.97 on January 1, 2018. The hike in diesel price has been even more steep. It has gone up by more than 22 per cent since January 1 when it cost Rs 59.70.

Last week, the West Bengal government reduced the excise on petrol and diesel by Re 1 per litre each.

The Karnataka government announced on Monday that petrol and diesel will be cheaper by Rs 2 per litre each across the state from Tuesday following the reduction in cess on these fuels.

As per the country’s pricing mechanism, the domestic fuel prices depend upon the international fuel prices on a 15-day average and the value of the rupee.

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Sensex swings 1,500 points, closes 280 points lower

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Sensex equity Nifty

Mumbai, Sep 21: High volatility, following a likely credit crisis in the infrastructure lending and development sector, dragged the market in the red, with the S&P BSE Sensex swinging in around 1,500-point range on Friday.

A plunge of over 1,100 points was witnessed on the BSE Sensex around 1 p.m, only to recover from the day’s low within few minutes. Similarly, the NSE Nifty50 also recovered after dropping below the 11,000-mark.

The sudden sell-off took place across the board with banking and financial stocks losing the most.

At 3.30 p.m, the wider NSE Nifty50 provisionally closed at 11,143.10 points, lower 91.25 points or 0.81 per cent from the previous close of 11,234.35 points.

The BSE Sensex, which had opened at 37,278.89 points, provisionally closed at 36,841.60 points, lower 279.62 points or 0.75 per cent from the previous close of 37,121.22 points.

The Sensex touched an intra-day high of 37,489.24 points and a low of 35,993.64 points.

The fourth consecutive session’s slide was triggered also by other factors, including lower possibility of the Reserve Bank of India cutting its key lending rates, analysts said.

IANS

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Man finds insect in cake at Ikea Hyderabad store, Tweets video

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IKEA Cake insect
The photo tweeted by the customer who bought a cake at IKEA's Hyderabad restaurant.

Hyderabad, Sep 21: Swedish furniture major IKEA’s first ever store in India in Hyderabad has again landed in controversy. Weeks after a customer had complained about finding a caterpillar in his biryani, ordered at Ikea’s store in Hyderabad, another customer has said that he found an insect in a chocolate cake that he ordered at the Ikea store.

The customer, Kishore, tweeted on September 12 that he found the insect inside a slice of chocolate cake while his daughter was eating the dessert at the IKEA store. He also posted a video in which an insect can be seen crawling over the chocolate cake.

The Greater Hyderabad Municipal Corporation has reportedly fined the Swedish furniture major Rs. 5,000 based on Kishore’s complaint.

IKEA on Thursday expressed regret over the incident. “In our Hyderabad restaurant when a customer was eating a chocolate cake which he bought, a fly was seen on the cake which eventually flew away. We regret this and apologise to our customer for the unfortunate experience. We are taking steps to avoid such occurrences,” an IKEA spokesperson said.

This is the second such incident that happened at the Ikea Hyderabad store that was opened on August 9. On September 2, a customer reported a caterpillar in the vegetable biryani supplied to him. Ikea India subsequently took vegetable biryani and samosa off its menu and apologised to the customer.

Read More: IKEA stops selling biryani, samosa after complaint

In the incident of the caterpillar in biryani, the furniture giant was fined Rs. 11,500 by the Hyderabad civic agency.

IKEA opened its first India store in Hyderabad on August 9. It has a 1,000-seater restaurant that serves a wide range of food, from Swedish to Indian snacks.

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