Creating competition – incorrect objectives and wrong methods

Recent “Assessment of State Implementation of Business Reforms, September, 2015” report has some disturbing elements. The important one being that this is not the last, or the only one, but it is a beginning. We are going to see this report, probably every year, or as frequently as possible, This report, which assessed a 98-point action plan prepared by a workshop in December, 2014, would be followed with more reforms. While the trend seems to be patting ‘good’ reforms, highlighting lack of action and pushing the States to compete with each other. Thus, the World Bank seems to have created a reform mechanism, that propels itself, while its Country Representative, Onno Ruhl, assures that they would do the nudging, at both State and Central levels.

Methodology of this assessment itself seems to be rudimentary and unscientific, as the study team tried to benchmark and discipline States to follow the path laid down in the “Make in India” workshop. One would wonder how the study team quantified the progress on 98-point action plan, which is essentially is populated by qualitative parameters. Interestingly, and erroneously, the assessment quantifies 8 parameters based on existing applications. Though the first parameter is ‘setting up business’, the last parameter is ‘enforcing contracts’. It means a State, between March and June, 2015, the period of assessment, does not show the change or progress, but the current situation. Gujarat, a State with developed infrastructure, definitely scores high. The report says in Telangana 80 percent of district judge appointments have been done, indicating progress on ‘enforcing contracts’. A poorer State which has not done such appointments, without such need, based on its size or need, does not score high on ‘enforcing contracts’. One cannot forget that judicial appointments are not done primarily to enforce business contracts, but based on law and order, financial status and many other factors.

Overall, the methodology is distortionary, and has a sinister objective of creating political competition. Simplistically, it means reforms at any cost, and through comparison and competition. However, the disturbing aspects are in the foreword and the executive summary of the report.

In this foreword, World Bank Representative is happy to note that ‘India has embarked on ambitious reforms focused on improving India’s performance in the World Bank’s Doing Business rankings’. This foreword is full of loaded words such as political commitment, agreed set for reforms, competitive federalism, renewed and vigorous efforts, etc.. He indicates that liberalisation agenda of the World Bank continues even after the change in the government. The Executive summary says, “States have wholeheartedly embraced the challenge placed upon them to focus on further streamlining the regulatory burden on business in India.” Ultimately, World Bank seems to have passed on its reform mandate successfully onto the central and State governments and they feel happy about it. Entire effort, and he is happy about the result, seems to be to create a mechanism that works outside the Parliament, and the system of Indian planning process.

Clearly, this assessment reports on the regulatory reforms undertaken by the States and Central governments to enable the growth of business and corporates. These reforms are wholly part of a liberalisation agenda, which has been rejected by Indian people many times across the States and at the national level, through elections and other means. However, World Bank seems to be coming up with new avenues of pushing for the reform agenda. Basically, this reform agenda is pushing for less or zero regulation, self-certification and no inspection. A investor-centric development model is a hazardous venture, that subsumes natural resources, poor people and regulatory systems, creating inequity, injustice and environmental chaos.

On the contrary, people would have been happy if the assessment was done on parameters such as levels of people participation in decision-making, promotion of livelihoods, efficiency of democratic institutions and official rules and procedures that enable transparency and consultations. Creating competition on such parameters would lead to positive change in the economy, employment and environment.


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