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Ease of Doing Business: An analysis of the UK India Economic Relationship

by The Business Influencer
Lakshmi Kaul – Head And Representative – UK At Confederation Of Indian Industry


It is during crisis, one is able to recognise their true allies. United Kingdom has found a true friend in India as the pandemic crisis posed layers of economic challenges; the most urgent being the capacity to provide basic healthcare. When India approved the export of 2,800,000 packets of paracetamol to UK, Rt Hon Liz Truss, the International Trade Secretary said “it’s imperative that we work together to continue global trade and keep supply chains open.”

India offered yet another reassurance when the UK government figures showed how India is the second largest foreign direct investment (FDI) source to UK, adding jobs and revenue to the local economy.

In a rapidly changing global trade landscape, robustness of supply chains has become top priority for each country and many have turned to India, including the UK.

Addressing Indian industry leaders at CII’s 125th Annual Meeting, the Hon’ble Prime Minister of India, Narendra Modi urged the Nation to move towards an ‘Atmanirbhar Bharat’ (self reliant India) listing five factors that would accelerate India on its path to development, namely Intent, Inclusion, Investment, Infrastructure and Innovation. In a bold statement of intent, the Indian PM said that the Indian Government considers the private sector as a partner for the country’s development journey.


Commitment to Joint Economic Partnership

At the recently concluded India-UK Joint Economic and Trade Committee (JETCO), the joint statement by Hon’ble Minister of Railways and Commerce & Industry, Sh Piyush Goyal and the Secretary of State for International Trade, Rt. Honourable Elizabeth Truss MP, said, “we celebrated the strength of  strategic economic partnership and particularly recognised the importance of our close collaboration in response to the Covid-19 pandemic. Focusing upon our growing bilateral trade, we noted that UK-India trade has increased steadily since 2000, and grew by 9.74% to over £24 billion in the calendar year 2019. We also discussed the shared ambition of facilitating our businesses to succeed in delivering investments, jobs, and prosperity in each other’s markets, and reiterated our commitment to the dynamic new India-UK Trade Partnership announced by our Prime Ministers in April 2018, and reinforced by both countries during last year’s JETCO. We look forward to go further in building links, bringing down barriers, and creating value between our two economies as the UK assumes responsibility for its independent trade policy. To deliver this, we seek to agree to an Enhanced Trade Partnership as part of a roadmap that could lead to a future FTA. The Enhanced Trade Partnership will seek to address non-tariff barriers to trade, and will establish a specific dialogue to explore routes to removing tariff barriers.”


Ease of Doing Business in India

Ease of Doing Business is a strong determinant of how attractive a country is as a business destination. With a reformist economic outlook, India has done extremely well to jump to the 63rd position in World Bank’s Ease of Doing Business Rankings. The figure corresponds to the following broad parameters:

  1. Opening a business
  2. Getting a location
  3. Accessing Finance
  4. Dealing with day-to-day operations
  5. Operating in a secure business environment

With accentuated economic reforms, the resultant jump in India’s EODB rankings was obvious. The nature of reforms making India attractive as a business destination as measured by the World Bank are:

  1. Starting a business
  2. Dealing with construction permits
  3. Getting electricity
  4. Registering property
  5. Getting credit
  6. Protecting minority investors
  7. Paying taxes
  8. Trading across borders
  9. Enforcing contracts
  10. Resolving insolvency

At a time, when COVID-19 has severely crippled economic growth world-wide, the impact on the domestic economy, too, is expected to be severe. The fresh data trickling in from the major global economies has started to show the profound impact of the COVID-19 pandemic. A clutch of GDP data released for US, Japan, UK and Eurozone for the first quarter of the current year have clearly shown the fault lines.


India’s response to the Pandemic

India’s economic growth was already on a weak footing when the COVID-19 crisis started and with the 21-day strict lockdown necessitated to prevent the spread of the contagion, economic activities were hit. But the lockdown period did give time to ramp up health and testing infrastructure in the country.

As on 2 August 2020, 08:00 IST, according to the WHO Situation Report there were 567,730 Active Cases 1,145,629 Cured/Discharged, 1 Migrated and 37,364 Deaths in India. India’s Case Fatality Rate (CFR) is its lowest at 2.15% since 1st Lockdown; Total recoveries nearly 11 lakh; and more than 36,500 recovered in last 24 hours.

There is now a consensus amongst economists that the Indian economy will witness a contraction in FY21, like all other global economies. However, the question is how deeply negative the growth is likely to be and how quickly we can recover. Given the uncertainty of the situation, we at CII have refrained from giving any ball-park number to the growth forecast of this year.

Government’s response to protect and rebuild the Indian economy was well crafted and largely focussed on protecting livelihoods. The comprehensive Rs 21 lakh crore economic stimulus package announced by the policymakers, which translates into roughly 10% of GDP, covered a spectrum of areas and sectors and is expected to provide a roadmap for putting in place the recovery process in the near to medium term.

In designing this package, the government had to tread a fine line between fiscal expansion and financial stability. The government managed to achieve this feat without putting excessive burden on the public exchequer. This leaves additional room for contingency measures in the future, should the need arise.

Peak power demand, e-way bill generation have all shown incremental improvements in June. Moreover, the agricultural sector, which remains the foundation of the Indian economy is expected to support the rebooting of the Indian Economy, with the forecast of a normal monsoon.

The resilience of Indian manufacturing is evident from the fact that within a period of 2 months, India has become the world’s second largest manufacturer of Personal Protective Equipment (PPE) starting from scratch.


The stimulus package announced by the government included a host of structural reforms that promise to make India an attractive investment destination. A slew of path-breaking reforms in the crucial agriculture sector, which includes freedom for the farmers to sell their produce without restrictions, ramping up agri-infrastructure are all aimed to improve efficiency in the farm sector and increase farmer incomes.


On the labour front, most state governments have also reformed their labour laws, which were a huge impediment to the growth of the manufacturing sector earlier. This significantly improves the ease of doing business for companies at the state level.


Mitigating the problem of land availability for potential investors, India has now earmarked land pools specifically to address the issue of land acquisition and is moving towards providing plug-and-play models for many sectors.


Sectoral Reforms and FDI Opportunities in India

In addition, a host of reforms pertaining to liberalizing FDI in a bunch of sectors such as defence manufacturing etc., opening of the coal sector for commercial mining, enterprise policy focused on private sector, power sector reforms among others have heralded a new paradigm of investment opportunities in India.

In view of the continuous efforts of the government to liberalise FDI, as per the latest World Investment Report by UNCTAD, India’s rank on the index improved by one place to stand at number 9 with a 20 per cent increase in FDI inflows in 2019, to US$51 billion.

In laying out India’s self reliance dream, the Indian Prime Minister stated:

  • MSME redefinition and government procurement policies will open up more opportunities for MSME. India’s talent and technology, innovation and intellect, farmers, MSMEs and entrepreneurs and industry leaders can bring growth back.
  • We must invest for the creation of a robust local supply chain that strengthens India’s stake in the global supply chain. Self reliance is about empowering our people to find solutions that can define the future of our country.
  • We have to increase productivity in all sectors. There are opportunities in the space sector and in atomic energy now. Be it farm, fisheries, food processing, footwear or pharma, the gates of new opportunities are open for industry in many sectors.

In conclusion, it is pertinent to mention that getting growth back is critical for India. And for this to happen, more reforms are the only way. Many path-breaking reforms have been announced by the Government and many more are the need of the hour. As an apex industry body, CII will play a key role in partnering with the government in charting India’s development trajectory.

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