When a country experiences very high and unusual price rise, it leads to a situation called hyperinflation. In this event, the currency starts losing its value and prices of commodities start rising on a daily basis.
For example, hyperinflation in Georgia caused prices of all commodities to double in 20 days.
Some of the biggest economies of today, such as Brazil, have seen sudden and rapid increase in prices of goods and steep decline in the value of money.
Let’s take a look at some of the worst hyperinflation episodes in the history.
India’s performance is particularly poor in enforcing contracts (ranked 186th out of 189 countries), dealing with construction permits (182), starting a business (179) and paying taxes (158).
This reaffirms the criticism that ground-level reforms have been left largely untouched in the country, at the Centre as well as the states.
Bureaucratic hassles, corruption and delays are as much part of doing business as they were at the start of economic reforms more than 20 years ago.
Unfortunately, reforms and liberalisation have come to mean changes in the policy framework. Much of the national debate on reforms has centred round opening up one sector or the other for the private sector or for multinational corporations.
While those changes are important, reforms at the ground level cannot be ignored.
Procedures remain opaque and immense discretionary power is still vested in the hands of officials.
The spate of recent corruption cases against businesspersons ought to have informed the government of this malaise. Unfortunately, nobody even bothers to pay lip service to it.
The latest World Bank report, in that sense, exposes the shallowness of India’s economic reforms. It shows that the buy-in on reforms in the country is far from complete, though Manmohan Singh, the man credited for dismantling the Licence Raj, is all set to complete two full terms as the country’s prime minister.
The World Bank report comes at a time when the government is trying hard to attract foreign direct investment into the country.
Countries that compete with India for investments have done better. Many in the top-ten list are India’s rivals for investments: Singapore (ranked 1st), Hong Kong, Malaysia and South Korea.
The report makes special mention of Malaysia, which has, for the first time, made it to the top ten on the list: It was ranked 12th in last year’s report and has been ranked sixth this year.
In these times, when other countries are rolling out the red carpet for investors, India cannot afford to neglect this crucial aspect of reforms.
The report was based on studying regulations between June 2012 and May 2013. The situation has likely worsened since then. After the telecom spectrum and coal-block allocation scams came to light, bureaucrats have become extremely reluctant to take decisions.
They fear that decisions taken by them now may be called into question five, or even ten, years later. The result is that the government has come to a standstill.
This has only made the situation worse for business. This inactivity doesn’t augur well for investments, growth and entrepreneurship.