In the last week, we saw two indices, which were released globally. One on hunger and another on Ease of Doing Business. India slipped from 95th position to 102nd position out of 117 countries in Global Hunger Index. While the country gained another 14 points in Ease of doing business jumping from 77th position last year to 63rd position this year among 190 countries. India improved its ranks by 79 position from 2014. The Ease of Doing business is calculated by the World Bank Group, while the Global Hunger Index is published jointly by two humanitarian organisations – Concern Worldwide and Welthungerhilfe.
India has been trying relentlessly to improve their doing business ranking by involving World Bank representatives in India and developing a subnational index bringing in a competition among states to reduce regulations based on a set of indicators developed for the same. The said aim is to reach into the first 50 rankings.
This year doing business reported 294 regulatory reforms worldwide in 115 economies. The top 10 reformer countries constitute 1/5th of these reforms and include Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan, Pakistan, Kuwait, China, India and Nigeria. The Doing Business report has recorded 3,800 business regulatory reforms across 190 countries since its inception in 2005.
According to the report, the upward movement of Indian ranking is due to four areas. These include regulation which made it easier to obtain construction permits, reduction in cost for starting a business, reduction in cost and time associated with border and documentation requirements, and resolving insolvency. India gained most was in resolving insolvency where India’s rank moved from 108 to 52.
The reality of these reforms, particularly the insolvency, is manifested in deep haircuts by public banks which gets its capital from depositors who save their earning in the banks. This could be seen from the fact that banks could only recover Rs 75,000 crore out of the 1.75 lakh crore which amounts to 57% haircut in the last financial year. With IBC, the banks are taking a massive cut which has resulted in capital erosion of the banks. In some cases, the hair cuts were as high as 83 %, like in Alok Industries which Reliance acquired with just above liquidation value resulting in massive loss to the banks.
This is over and above the write off by Public Sector Banks. State Bank of India, which is the largest public sector bank in India, has written off bad loans worth Rs 76,600 crore of 220 defaulters, who owed more than Rs 100 crore each. Public Sector Banks, on the whole, have written off a sum of Rs. 2.75 lakh crores for entities that borrowed Rs 100 crore or more from scheduled commercial banks. The Ease of start of business and exiting business is a key indicator to the Doing Business reports.
What is often pushed is not just public paying for the corporate debts but more subtle reforms which relax environmental norms and labor standards for the business. Simeon Djankov, Director of Development Economics at World Bank have commented that India needs a fresh set of “bold reforms” to enter into top 50 countries, indicating a fresh push for more business-friendly reforms in the country.
The President of PHD Chamber of Commerce and Industry have come out asking for reforms in land acquisition and relaxation of labor laws in the country The lack of environment clearance has already been sited by the industry as an impediment for business in the country and have succeeded in changes in policies and laws and special treatment to bypass existing regulations.
Another area in which the Ease of Doing Business is cutting roots is in the case of environmental norms and regulations. The government is giving all kind of exceptions for relaxing environment norms so that development projects are not affected by existing laws. This include, exemption of mining of minor minerals like sand in up to 25 ha area from prior public consultation and the environmental impact assessment (EIA), which was later struck down by the National Green Tribunal.
The central government also exempted industries like steel, cement and metal from mandatory prior environment clearance for setting up a new or expanding the existing captive power plant employing waste heat recovery boilers (WHRB) without using any auxiliary fuel. The Environment Ministry has also tampled with the procedure for environment clearance of developmental activities with the 10 km buffer zone around sanctuaries. There will be no need for prior clearance for projects in the buffer zone thus diluting the earlier provisions. India’s apex national board for wildlife (NBWL) who have responsibility for allowing forest land in protected areas to be diverted for industry cleared 682 of the 687 projects almost 99% which came up for scrutiny. According to Ritwich Dutta, an environmental lawyer who has challenged the dilution of environmental norms in National Green Tribual in an interview to HuffPost India says that not a single legislative step was made in the last four years to protect the environment and every law related to environment is being diluted which will make urban areas unliveable.
The offense is not limited to the environment alone, labor laws are the major area in which Ease of Doing Business proponents was to deregulate for carrying the business with ease. World Bank has been advocating lower minimum wages and greater hiring and firing power for employers and to remove regulations which prevent companies from hiring labor at lower cost. The indicator on labor though not a part of the ranking, is still retained in the Doing Business even after global protests from labor unions. India passed its code on wages which consolidate older laws like the minimum wages act, payment of wages act, equal remuneration act but in the process dilutes critical provision for the protection of wages as being crtiqued by the trade unions for dergulating the labor sector . The Indian trade unions are on a warpath against the proposed reforms and have been critical of changes made in the name of Ease of Doing Business.
Some of the earlier reforms which were cited for an higher ranking in the Ease of Doing Business like the GST have been acknowledged to have an opposite effect by Indian traders who claim the processes are cumbersome. The high GST rates have increased the indirect tax and together with demonitisation, GST is being blamed for the slowdown of the economy resulting in lower tax collections, prompting the government to divest in public sector for raising resources. Likewise, corporate tax is being reduced significantly from 30 % to 25% resulting in exchequer losing ₹1.45 lakh crore per year. The additional burden on common people and working-class will result in massive strike back to the prescriptions of IMF and World Bank as we see the protests in Greece, Ecuador, Lebanon and other countries.
While the government was busy pushing for Ease of Doing Business and gifting public money for corporates and easing land acquisition, labor laws and environment, the share of wasting among children in India (the share of children under the age of five who are wasted – that is, who have low weight for their height, reflecting acute undernutrition) rose from 6.5 per cent in the 2008-2012 period to 20.8 per cent in 2014-2018 which is the highest for any country studied under the Global Hunger Index and less than 10% of the children in the country is having a minimum acceptable diet this day.
The indicators and directions used in the Ease of Doing Business ranking are challenging the very notions of environmental regulations and equity which is at the heart of the global movement of people who question the role of corporate greed is destroying the planet. Business can no longer be blind to labor and environment and it has to subsume itself for ease of living and life on the planet.