India's Rise In 'Doing Business 2018' Ranking: A Celebration Too Early?

World Bank’s recently published ‘Doing Business Report 2018’ upped India’s ease of doing business rank to 100 this year. While India is still a long way from making it to the top 50 (which is the Modi government's goal), this remarkable jump by 30 ranks suggests that the business slumber party is over and work to creating a business-friendly environment is actually on in India. Also, India figuring as the only economy in South Asia to join the list of the 10 top improvers in the 2018 report and Moody's upgradation of India's sovereign rating could mean an early Christmas for Modi-land. Has India's business climate remarkably improved in a matter of just a year? If yes, what are the parameters that have helped us make this remarkable leap?

- Indranil Das

The date October 31, 2017, was a remarkable day for the Modi-led government, as the World Bank published the 2018 edition of Doing Business report announcing that India is now a member of the top 100 club in the Doing Business rankings. The cricket-loving nation that we are, we sure were happy to hit a century. As everybody surely knows by now, India jumped by 30 places in the ease of doing business rankings to the 100th position out of 190 countries, the highest jump for any nation this year. The jump was a great morale booster for the government which had been at the receiving end of criticism, especially when it came to handling the nation's economy. GDP and job growth were both lack-lustre and economists and industry were blaming it on the double wham my of the ill-conceived demonetisation initiative and the hastily implemented Goods and Services Tax (GST) reform. There was more good news in the offing. Just a fortnight later, the government received another shot in the arm when Moody’s Investor Service upgraded the Government of India’s sovereign ratings by two notches, from Baa3 stable to Baa2 positive.

RANKINGS & RATINGS

While the twin good news does call for celebration, let us first look at what the improved ratings and rankings really mean. Moody’s rating (of Baa2) for India, which was last upgraded in 2004 to Baa3, simply means that the government is now in a better position to repay its debt, and should be able to therefore negotiate better debt terms from external lenders, which should in turn lower cost of India's infrastructure projects. More foreign direct investment (FDI) is also expected to flow in, as some investors who don’t invest in countries having a rating of below Baa3 will now invest in India. Moody’s upgraded rating indicates that India’s growth prospects are a strong in the medium-term.