View: PM Narendra Modi has taken serious business regulatory reforms

By Jim Yong Kim
Fifteen years ago, the World Bank published the first Doing Business index, which ranks countries according to their regulations for starting and operating a business. The report measures 11 areas of business regulation such as dealing with construction permits, registering property, paying taxes, and enforcing contracts.
These might seem like mundane, bureaucratic rules, but the reality is that the ease of doing business matters a great deal – for economic growth, future prosperity, and helping people lift themselves out of poverty. We publish the rankings every year to get the attention of heads of state and ministers of finance and make the findings hard to ignore.

Few world leaders have taken business regulation reforms as seriously as Prime Minister Narendra Modi. I first met Prime Minister Modi in October 2014, just days before that year’s Doing Business report was published. India ranked 142nd among 189 countries that year. One stark example of the difficulty of starting and running a business in India: an entrepreneur that wanted access to electricity had to go through 7 official procedures that took over 100 days and cost nearly 5 times the country’s per capita income.

Prime Minister Modi was dismayed at India’s position. He shared his vision for achieving a top 50 ranking and asked the World Bank Group to provide knowledge and advisory support to help make that vision a reality.

India has vastly improved its business regulations. For example, according to this year’s Doing Business report, an entrepreneur can obtain an electricity connection in half the time and through half as many procedures as in 2014, and now it costs less than 30% of per capita income. These reforms lifted India’s rank in that category from 111th in 2014 to 24th today.

For India’s entrepreneurs, that means they can get businesses up and running more quickly and expand to new locations without disruptive power outages. For India’s workers, it means more jobs. Unstable electricity connections cause multinational companies to move to other countries, reducing both production and employment.

India has made even larger improvements in the time and effort it takes to get construction permits. At the World Bank Group, we have seen how convoluted permitting processes cost time and money – and also lives. When procedures are long and complicated, an estimated 60 to 80 percent of buildings in developing countries are constructed without proper permits. Too many countries have seen the tragic consequences of poor quality control when buildings collapse.

In 2016, India ranked 185th in the world in dealing with construction permits; today the country ranks 52nd. One assistant engineer reported that he was able to correct an issue with inaccurately-deposited fees in 20 minutes. The process used to take 5 working days.

The other categories where India scored the highest are Getting Credit (24th) and Protecting Minority Investors (7th). These complementary indicators are important for investor confidence. Countries that protect minority investors typically have bigger and more dynamic stock markets, while good practices for getting credit help business owners and entrepreneurs access capital from banks.

These kinds of reforms can have an enormous impact on countries’ economic growth. A number of studies have shown that reforms like the ones in India can boost productivity, increase access to new technologies, and lower interest rates. But for reforms to count, they have to improve both regulatory quality and efficiency. That means simultaneously cutting red-tape and ensuring that the regulations include safeguards to sustain reform.

India has made tremendous improvements in both of those areas, but the work is far from over. The Government of India has committed to initiating deeper and wider reforms across the country through a competitive process to promote reforms in all states. This approach is already helping spread the benefits of business reforms across the entire country. India’s success at the state level has also attracted interest from officials in other federal or multi-tiered countries such as Nigeria, Russia, Indonesia, and China – who are now drawing on India’s experience.

In the coming years, it will be critical for India to build on this momentum and make the country one of the most fertile climates for starting and running a business. The World Bank Group is working closely with the government, not only to improve the country’s performance on the Doing Business index, but to bring the benefits of these reforms to everyone across the country.

Prime Minister Modi’s vision, and the effort to achieve it, will help increase prosperity and give India – and its people – the opportunity to achieve their highest aspirations.


(The writer is World Bank Group president)