Ease of doing business – why the 1st ranked New Zealand scores heads above the 63rd rank of India

So, why is New Zealand the first in ease of doing business? The answer lies across a broad spectrum of social, economic and political initiatives. The World Bank rankings shows that New Zealand was globally ranked 1st in starting a business (it takes less than a day to fully register a new business) and getting (business) credit, 2nd in registration of property, 3rd in protecting minority investors and ninth in paying taxes.

 

India stands at Nr.6 in the global ranking for extent of share-holder rights index, and as yet does not have an honorable mention in any of the other categories. There is no doubt that the current government under the leadership of Shri. Narendra Modi is undertaking efforts to simplify and streamline compliance processes and reduce transaction costs, and in the consolidation of existing confusing labor legislations into four codes – on Industrial relations, Occupational safety, Wages, and Social security. Minimum wage in India is between US$ 66 ~ $ 202 as against that of China’s, which is between $ 140 ~ $346; while in terms of Human Capital Index India ranks 103rd against China’s 34th position. [This comparison is offered only as a reference point to highlight the idea of India replacing China as a global manufacturing entity].

 

 

Covid-19 pandemic has impacted global economy. According to the World Bank data (published on 01 April 2020) – “Governments around the world are offering tax relief to address the problem of liquidity for households and businesses, and to brace for the economic slowdown precipitated by the Covid-19 pandemic.” The extension of tax payment deadlines has been the most widely adopted tax relief measure around the world, followed by waiver of the employers share of payroll tax, quicker tax refunds for VAT/GST input credits, VAT rate reductions and many countries offering tax incentives to boost international investment.

 

In India, TDS (tax deducted at source) has been reduced by 25% of the existing rates. However, this facility is not extended to those who are unable to furnish a PAN (permanent account number for taxation) and Aadhar (a national registration system number for individuals in India). The other initiates are mostly extensions for filing various taxes; measures that are considered as non-effective compared to those undertaken by other countries that are committed to improving their respective economies.

 

To improve real business activities in India, much more needs to be done than what is recommended by the World Bank or Western controlled financial institutions. Registration of proprietary MSME business enterprises under ‘Udyam’ should be off-line also, because in reality the exclusive online registration portal is both slow and inefficient. The second most important decision that the Government will have to make, is on taxes. If the Government in power takes the unprecedented steps of abolishing personal income-tax and reducing GST to a maximum of 12%, it would not only give a major boost to the economy but also catapult India onto the world stage as a prime economy for foreign investments.

 

The tax and bureaucratic reforms must have the support of a well-trained work-force and efficiency in government transactions. Forming a LLP or Private limited company in India takes two to three months, against less than five working days in most countries. The suspicious attitude in Govt. departments and ministries, that considers entrepreneurs as “guilty until proven innocent” is the most important change that is needed. The bureaucracy has to assist business as partners in the economic success of our Nation and give up the role of being hall-monitors trying to discipline errant students. Control has to be replaced by guidance and the invisible threat of prosecution has to be replaced by mutual trust and confidence. Slogans don’t make for a strong economy, focused action on-the-ground does.

 

The National Education Policy of 2020 (NEP2020) is a determined and much required positive step to create a strong skill-based work force across all demographics. Overall, the potential for success is great if this policy is implemented efficiently. An uneven amount of stress is being placed on remote / e-learning, when the stress should be on the usage of all types of communication methods to deliver education and skill-sets. E-learning should be a tool of education, not the master of policy process. The other important aspect is the social philosophy that schools for profit are bad for the Nation. This thought process is meaningless and restricts the educational system from reaching its peak efficiency. The government should focus on operating its own schools; free, subsidized or not-for-profit, in the most efficient manner; and allow private schools and technical institutions to operate in a free-market economy. In our diverse cultural society, where financial strength of the people range from below-poverty line earning to billions, the mix of government owned or aided school system has to co-exist with private sector and for profit schools. Trying to control the private sector is self-defeating politics since private sectors can and do use latest technology to circumvent outdated government policies.

 

Finally, it’s the responsibility of each citizen to be a part of the skill-training and education process. Not only does each of us have to increase our learning quotient by acquiring the latest knowledge, we also have to pass on our knowledge to others. “Each One, Teach Two” should be a part of our civic and social fabric; for only then can we achieve a robust and economically strong society and therefore a strong Nation.