Topic – Indian economy : Issues
4) Examine the reasons India lags behind in contract enforcement in EODB rankings? Suggest what needs to be done?(250 words)
Why this question
India has recently made rapid strides in doing business ranking system. While improvement has been seen across various parameters, one aspect where India has remained stagnant is in enforcing contracts. Considering the importance contracts have for businesses, it is one aspect which needs close attention and hence this question.
Key demand of the question
The question expects us to bring out the current rank of India in enforcement of contracts and explain the reasons why India has not been doing so well. Next, we need to explain in brief the impact of non enforcement of contracts for businesses and give suggestions on what can be done to improve the situation.
Examine – When you are asked to examine, you have to probe deeper into the topic, get into details, and find out the causes or implications if any .
Structure of the answer
Introduction – Mention that while India’s overall position in doing business ranking has gone up, in contract enforcement we haven’t improved.
- Explain the reasons why contract enforcement is important for a business.
- Explain the reasons behind poor performance on this particular metric – lack of commercial courts despite regulatory changes, Government contracts get modified or nullified post contract signing, leading to significant damage to shareholder value, bring out the issues with revision of power purchase agreements in case of electricity companies etc
- Give suggestions as to what can be done to improve the situation – setting up commercial courts, beefing up the arbitration process etc
Conclusion – Emphasize on the importance of improving on this metric and discuss way forward.