India Drops in World Bank Ranking to 142 of 189 Countries

NEW DELHI: Instead of starting the upward journey towards a 50 ranking in ‘ease of doing business’ as promised by Prime Minister Narendra Modi, India dropped in ranking from 134 to 142 among the 189 countries surveyed by the World Bank against this measure.

However, since the cut off date for the report was end of May, shortly after the Modi government to power, World Bank officials speaking to the media maintain that if the slew of measures taken and promised by New Delhi are implemented the rankings could change substantially next year. More so if India focused on the manufacturing sector performance and improved it substantially, according to the report.

The World Bank Update is clear :India’s longer term growth potential remains high due to favorable demographics, relatively high savings, recent policies and efforts to improve skills and education, and domestic market integration. Improved growth prospects in the US will support India’s merchandise and services exports, while stronger remittance inflows and declining oil prices are expected to support domestic demand,”the Update added.

However, the risks involved were also outlined in the Update which stated, “The projections could, however, face risks from external shocks, including financial market disruptions arising out of changes in monetary policy in high income countries, slower global growth, higher oil prices, and adverse investor sentiment arising out of geo-political tensions in the Middle East and Eastern Europe.

Domestically, the risks include challenges to energy supply and fiscal pressures from weak revenue collection in the short term, the Update said. However, risks could be mitigated to a large extent by focusing on reforms that help the manufacturing sector.”

Prime Minister Modi has raised the “Make in India” slogan that promises to focus on the weak manufacturing sector in India. It remains to be seen whether this will move forward with the speed necessary to offset the World Bank assessment, “Manufacturing in India accounts for around 16 percent of GDP, a level that has remained largely unchanged in the last two decades and is relatively low when compared to the 20-percent plus share in countries like Brazil, China, Indonesia, Korea and Malaysia, even after controlling for differences in per capita incomes. “

The Update also said, “ supply chain delays and uncertainty are a major, yet underappreciated, constraint to manufacturing growth and competitiveness. Regulatory impediments to the movement of goods across state borders raise truck transit times by as much as one quarter, and put Indian manufacturing firms at a significant disadvantage with international competitors.

State border check-points, tasked primarily with carrying out compliance procedures for the diverse sales and entry tax requirements of different states, combined with other delays, keep trucks from moving during 60 percent of the entire transit time. High variability and unpredictability in shipments add to total logistics costs in the form of higher-than-optimal buffer stocks and lost sales, pushing logistics costs in India to 2-3 times international benchmarks,” the Update said.