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Ease-of-doing-business: Is the Modi government on the right track?

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By NewsGram Staff Writer

India, one of the lowest ranking nations in World Bank’s Ease of Doing business ranking, has further dropped two places to stand at 142nd out of 189 in the latest rankings.

Keeping in mind the tough task that lies ahead of them, the NDA government, under the make-in-India campaign, has initiated several steps in the last few months to make India a business-friendly destination.

In the ten metrics used to measure ease of doing business in the World Bank’s 2015 report, covering the period from June 2013 to May 2014 (when the UPA was in power), India came close to the bottom in two categories.It stood a wretched 184th in the category dealing with construction permits, and 186th in enforcing contracts.

On the bright side, India stood 7th, an improvement of 14 places, when it came to protecting minority investors. It is the only category in which India has shown an improvement from 2013, when it was ranked 21 in this category and 140 in the overall ease-of-doing-business.

According to Bernhard Steinruecke, Director General of Indo-German Chamber of Commerce, India has a lot of potential for attracting international businesses but the ‘ease-of-doing’ business has to be improved. German companies are very optimistic about India and it would be win-win situation for both the countries if only the conditions for business are improved.

“India is setting up Industrial corridors like the Mumbai-Delhi, Chennai-Bengaluru, Chennai-Vizag and Ludhiana-Kolkata. Therefore several countries like Japan, Germany, Britain, France, US and China are keen to set up manufacturing units in those industrial corridors.

But procedural hurdles delayed the process and Modi government has taken the necessary major steps that are expected to bear fruit in the coming months and years,” Steinruecke said.

Tax rules are complex all over the world but the retrospective tax brought by the previous UPA government two years back, following the Vodafone tax dispute, caused more harm than good.

NDA government, particularly finance minister Arun Jaitley, has given an assurance that the retrospective tax would not be invoked by his government in future.

Modi government has promised to improve India’s ranking to 50th by 2017 from the present 142nd position.

The task is not going to be easy but the Indian Prime Minister has already taken big strides by  setting in motion several initiatives in this regard. One such example is the transparent manner in which the coal and the spectrum auction were conducted, filling the coffers of the government with a revenue of over Rs 3 lakh crore.

World Bank President Jim Yong Kim, had said as early as July last year, that India could jump 50 spots by just implementing the Gujarat Model of reforms.

The Confederation of Indian Industry (CII) has already made certain recommendations to the Prime Minister’s Office (PMO) on streamlining investment approvals and provision of utilities, including an appropriate labour development ecosystem.

The government has already moved on several issues and many states have initiated labour laws reforms. The union government is also moving towards allowing unviable companies with up to 300 employees, to close down without permission.

Prime Minister Modi’s pragmatic governance approach has ensured that approvals for over 400 projects with investments over $70 billion have been expedited.

More than 30 Groups of Ministers (GoMs) and empowered GoMs (EGoMs), set up by the previous United Progressive Alliance (UPA) government, have been removed as an administrative reform to tackle cross-jurisdictional issues involving more than one ministry.

These GoMs and EGoMs slowed down decision-making considerably. Administrative aspects of such issues are now tackled by Cabinet Secretariat, resulting in speeding-up of project clearance. Issues related to policy aspects are now dealt with by the PMO.

Another significant decision taken by the Modi government was to replace the Planning Commission, created in 1950,  with a think-tank of experts drawn from public and private sectors – one that is better aligned to meeting 21st century requirements.

These are some of the positive steps taken by the government to improve India’s ease-of-doing business ranking. Whether the measures are sufficient to get the Indian economy back on the high growth trajectory of 8-9 per cent annually, remains to be seen.

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Poverty and Inequality Rising Rapidly in Thailand: Report

Poverty, Inequality in Thailand on the Rise, World Bank Says

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"Taking the Pulse of Poverty and Inequality in Thailand," launched last week, says the country's poverty rate jumped from 7.2% to 9.8% between 2015 and 2018, adding nearly 2 million new people to the ranks of the poor. Pixabay

By Zsombor Peter

Thailand’s poverty rate has been rising in recent years despite steady, if slow, overall economic growth, a new World Bank report says, widening the gap between rich and poor in Southeast Asia’s second-largest economy.

“Taking the Pulse of Poverty and Inequality in Thailand,” launched last week, says the country’s poverty rate jumped from 7.2% to 9.8% between 2015 and 2018, adding nearly 2 million new people to the ranks of the poor. Inequality, as measured by household consumption, also spiked in 2016 for the first time in four years and has eased little since.

Analysts see a direct link between those figures and the results of last year’s general elections, Thailand’s first since a 2014 military coup led by then-General Prayut Chan-ocha, now the country’s prime minister.

Pheu Thai, a party tied to former Prime Minister Thaksin Shinawatra, won the second most votes and the largest share of seats in the popularly elected House of Representatives, the lower house of the National Assembly,  with strong support from some of the country’s poorest provinces in the North and Northeast.

A junta-appointed Senate and Election Commission finally tipped the contest to form a majority government in Prayut’s favor, but the numbers echoed the lasting disaffection of the country’s poor.

“Plummeting incomes were clearly a major factor in the opposition’s strong showing in the 2019 general election. That is why Pheu Thai did so well — especially given  that rural farmers and also urban households continue to be attracted by the populism of Thaksin,” said Paul Chambers, a political analyst and lecturer at Thailand’s Naresuan University.

Thaksin was first elected prime minister in 2001, after the shock of the Asian financial crisis of the late 1990s, and reelected four years later only to be kicked out of office by a military coup in 2006. The telecoms tycoon now lives abroad, avoiding a 2008 corruption conviction that he disputes. However, the subsidies, cash transfers and other populist policies he pushed have left him and his proxies with a loyal following among the farmers of Thailand’s rural North and Northeast, who feel left behind by an urban elite cloistered mostly in the capital, Bangkok.

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The World Bank said many of Thailand’s poverty spikes coincided with regional or global financial crises or with drought but added that periods of political instability also tend to depress consumption and investment, which can drive incomes down and poverty rates up. Pixabay

“That is partly why Thaksin was able to rise in the early 2000s, because of grievances over this disproportionate allocation of resources,” said Harrison Cheng, an associate director with consulting firm Control Risks who follows Thailand.

He said the concentration of wealth and power in Bangkok has continued under Prayut.

The World Bank report backs him up. It shows poverty hovering steadily at about 2% between 2015 and 2018 in Bangkok while rising everywhere else, nowhere more so than in the strife-torn South. Riven by a Muslim insurgency, the South became the country’s poorest region in 2017, only just edging out the Northeast with a poverty rate of about 12%. The South again topped the Northeast in 2018 with a poverty rate just over 14%.

The report ascribes the latest rises in poverty and inequality to droughts, slow economic growth and falling incomes among both rural farmers and urban businesses.

The bank says Thailand has now seen four such spikes since 2000, more than any of the other nine Association of Southeast Asian Nations countries.

The report’s author, Judy Yang, attributes that, at least in part, to slow wage growth during the period, slower than in any of the bloc’s other large economies.

“If you are a household, what really pulls you out of poverty is getting a better-paying job, getting more income, getting labor market income,” she said.

What also sets Thailand apart is its political turmoil. The coup-prone country has seen four swings between military and civilian rule since 2006, governments cut short by controversial court orders and several rounds of mass protests, some of them deadly.

The World Bank said many of Thailand’s poverty spikes coincided with regional or global financial crises or with drought but added that periods of political instability also tend to depress consumption and investment, which can drive incomes down and poverty rates up.

Cheng, of Control Risks, said his conversations with clients confirm that Thailand’s volatile politics have kept many potential investors at bay, holding the economy back.

“A lot of the investors are staying away and taking a wait-and-see approach for a long, long time now,” he said.

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A man begs for money in central Bangkok, Thailand. VOA

“If they are not in Thailand already, they will be thinking very seriously about whether they should do so because what if there’s a change in government again? What if there are massive street protests like in 2013, 2014? Are you going to repeat the 2010 Bangkok standoff between the Red Shirts and the military?” he added, referring to Thaksin supporters by their color-coded apparel of choice.

Cheng said the constant and sudden turnover in governments has also fostered a habit of short-term policy prescriptions on poverty and inequality that have done more to soothe the symptoms than cure the causes.

Chambers and Cheng agreed that if the latest bout of bad numbers gets worse, Prayut’s problems will also be increased by swelling ranks of not just the poor but also of disenchanted voters.

The World Bank report proffers poverty and inequality figures only up to 2018 but adds that “trends beyond this year are not optimistic, given continued low economic growth rates and stagnant wages.”

Another severe drought devastated farmers last year as the country’s gross domestic product growth rank sank to 2.4%, its lowest since 2014. GDP forecasts for 2020 are even worse, owing much to the novel corona virus outbreak, which has hit the country’s important tourism sector hard.

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To counter those blows, Prayut’s government has ramped up and introduced new social welfare programs for the poorest households and last week approved a stimulus package expected to pump some $12.6 billion into the economy.

The World Bank recommends that authorities continue to strengthen the country’s safety net and create better jobs for low-income earners in the short term. In the longer term, it says giving all children equal access to health and education opportunities would be the best way to make future generations more prosperous and more equal. (VOA)