An eternal competitive disadvantage

India breached the top 100 club of the Ease of Doing Business (EODB) rankings for 2017 and then made it to 77 for 2019, leapfrogging 53 spots over two years in this international business beauty contest. This progress reflects a marvel of focused attention from Raisina Hill, even if you are sceptical about the veracity of the exercise. Some sections of the media have chosen to present this progress as an achievement. Here is an alternative reality check.

Among almost any business, tourism provides a handy proxy of how well a country can fare as a business investment destination. By its nature, tourism covers all the parameters on which the EODB bases its assessments (just ask a prospective hotelier what it takes to set up a facility from scratch!) and extends to the more universal elements — culture, hygiene, safety, public infrastructure and so on — that constitute the real and tangible operating environment in any country.

Viewed from this angle, how does India fare?  When you synchronise the World Bank’s EODB rankings with the World Tourism Organisation’s numbers the answer that presents itself is at once frustrating and hopeful.

According to the World Tourism Organisation, the top ten most visited tourist destinations are in Europe, the Americas and Asia, in that order. India, with its infinite and fascinating varieties, does not figure in that list. It isn’t even among the top five tourist destinations in Asia, weighing in at number seven, preceded by China, Thailand, Japan, Hong Kong, Malaysia and the gambling haven of Macau.  

The same top ten tourist destinations also figure in the upper ranges of the EODB rankings. With the exception of Italy at 51 and Malaysia at 54, the top tourist destinations fall within the top 50 EODB ranks.  

Within the Asian Big Ten in terms of tourist destinations, India’s EODB rank, which some sections of the media have presented as an achievement, is the lowest. Only Indonesia at 73 comes close.  Two of the ten — Singapore and South Korea, the eighth and ninth largest Asian tourist destinations — are among the top five EODB ranks at two and five respectively. China, the country with which Indians are illogically prone to compare, is the largest Asian destination and the world’s fourth largest, and has an EODB ranking of 46.  The Middle Kingdom hosted nearly 61 million tourists last year to India’s 15.5 million (for both countries, the numbers need some deflating to account for home visits from their respective diaspora). Both Beijing and Delhi have well-earned global reputations for bad air; yet the Chinese capital draws many more visitors than the Indian one.

The frustrating part is that India could easily have been a front ranker in terms of both the forex-earning hospitality business and EODB. On the first parameter, France, Italy and Spain count among their ranks some of the world’s rudest and most inefficient wait staff. China, Thailand and South Korea remain innocent of the rudiments of English, the global language of communication, and most Europeans decline to speak it (a trend Brexit may have exacerbated). To the Indian abroad, the contrast with the quality of domestic hospitality at almost every level is manifest.

The critical difference between those jurisdictions and India are public safety and public infrastructure. In spite of language barriers, it is possible to travel on public transport in most of western Europe and south east Asia without fear of molestation and the risk of a random infection. It is also possible for women visiting these countries to travel to tourist monuments alone without the dubious privilege of being stared out of countenance, harassed or worse. These are standards that are taken for granted; in India, they are considered privileges (which is why we can’t stop talking about our world-class airports). These elements also count when global businesses make their investment decisions.

The fact that India ranks among the tenth largest recipient of FDI inflows points to the enormous potential for a more optimum expansion of business in general and the employment-intensive tourism industry in particular. India is only the third Asian country bar China (at number two) and Singapore (at number eight) to figure in this ranking. At the start of the tourist high season, this fact only serves to highlight India’s eternal competitive disadvantage: the mismatch between private aspirations and capabilities and the public delivery of services.