Thread by @Sabya_K

1/6 The govt. wants to #MakeinIndia by improving our ranking in the World Bank's #easeofdoingbusiness indicators.

My paper (bit.ly/2NJmxSB) with @kunalsen5 and Rajesh Raj (EPW, forthcoming) shows that business climate and productivity cannot be improved this way.

2/6 India's business climate has always been poor. Our ranking in the World Bank’s Doing Business Indicators have forever been low.

The current government has attempted to reverse this situation by improving the #rules related to the World Bank's Doing Business indicators.

3/6 Can their attempt really improve the business environment and increase productivity to ensure #MakeinIndia?

We answer this question by using firm level data, looking at business environment in terms of number of days it takes to get operating license or construction permit.

4/6 We find that states with weaker quality of governance provide better 'business environment' in terms of the speed of obtaining licenses and permits.

This suggests that firms ensure greater ease of doing business through 'regulatory capture' of weakly governed states.

5/6 We also find that for most states, licenses and permits are obtained more quickly by less productive firms.

This shows that easing the norms of business regulations need not necessarily lead to higher firm productivity.

If this is the reality of India's business environment, then the government's attempt to achieve #MakeinIndia by reforming the 'de jure' rules related to #easeofdoingbusiness in India seems unlikely to succeed in its objective.

@MilanV @CafeEconomics @Roshanjnu @GlobalDevInst