New Delhi, 24 June 2016: The fifth edition of FICCI Pinkerton annual study “India Risk Survey 2016” (IRS 2016) was released at FICCI today. This is an attempt to showcase the views and perceptions of business leaders, policymakers, experts, as well as professionals across various sectors and geographies, regarding strategic, operational and safety risks to business establishments. The survey spreads across the entire industry spectrum covering different geographical zones of the country. The results of the survey provide industry experts and government decision-makers with an important tool to holistically analyse the impact of various risks, so as to plan and execute strategies to prevent, mitigate or control the impact of these risks to business establishments.
Overall Risk Rating
The survey encompasses 12 key risks that pose a number of threats to the entire economic ecosystem of the country. An interesting trend that emerges out of the survey results is that new risk categories have made their way to the top, but there is not much difference in percentage terms between the top five risk categories (as the above graph clearly highlights).
A majority of the respondents surveyed this year have ranked ‘Strikes, Closures & Unrest’ as the major risk affecting the Indian economy. This is in sharp contrast to last year’s survey results, in which ‘Corruption, Bribery and Corporate Frauds’ emerged as the topmost risk. This particular group of risks continues to command serious concerns for Corporate India, particularly in a year which has seen major unrests in the form of the Jat and Patel (to name a few) demand for reservations in education and government jobs, etc. In addition to the heightened social unrest this year, labour unrest, strikes and demonstrations protesting reforms, land acquisition and industrial projects continue to shape business perception. The risk category held top spot in the 2013 survey results, went down to No. 2 in 2014, and subsequently declined to 6th position in 2015.
‘Information & Cyber Insecurity’ has been ranked as the second biggest threat to businesses in India, for two consecutive years. The high rating points to the fact that it is a persistent risk for both private and government sectors in a high-technology driven global economy, where a growing trend is the rise in cyber-aided hacking. Information insecurity along with infringement of intellectual property and corporate fraud remain some of the crucial concerns in business strategy, across sectors and geographies.
‘Crime’ has jumped to 3rd position in 2016, from its 5th ranking in last year’s India Risk Survey. The National Crime Records Bureau (NCRB) data for 2014 shows an increase of 8.9 per cent in crime over 2013. In terms of numbers, NCRB registered a total of 72,29,193 cognisable crimes, comprising 28,51,563 Indian Penal Code (IPC) crimes and 43,77,630 Special & Local Laws (SLL) crimes in 2014, as against 66,40,378 registered cases in 2013. Higher crime numbers are often closely associated with the rise in civic unrest, which creates favourable conditions for criminals of all hues. Further, crime against women in India is on the rise, which continues to shape the country’s image internationally and within the wider business community.
‘Terrorism & Insurgency’ has dropped a spot from its previous ranking at No. 3 to No. 4 this year. The devastation that take place from terror attacks can easily disrupt the entire business operations. A major fear is the rise of terrorist activities in the Middle East and its expansion to the Indian subcontinent. Along with it, growing radicalisation of disgruntled youth is a major concern for policymakers of the nation. Along with terrorism, insurgency by leftist guerrillas groups, called Naxals, and other ethnic insurgencies in various parts of India, pose major risks for business establishments and operations. The Naxal threat, in particular, is as severe as terrorism, and their presence in many states of the country, some of which are extremely rich in mineral resources, has a debilitating effect on new business establishments.
India’s sustained improvement in its ratings in global corruption and ease of doing business indexes in the last two years has contributed to the decline in the ranking of the risk of ‘Corruption, Bribery & Corporate Frauds’, which has slipped four places to 5th position in the India Risk Survey 2016.
India’s sustained improvement In the Corruption Perceptions Index (CPI) 2015, India improved its rank to 76, which is the best in the South Asian region after Bhutan. India did even better than another major Asian neighbouring country, which has been ranked 83rd in the index. In the World Bank’s Doing Business Index, India improved its rank to 130 in 2015, up four places from 134 in 2014. Likewise, after five years of constant decline, India’s rank improved 16 places to 55 in the World Economic Forum’s (WEF) Global Competitive Index 2015–16.
The risk of ‘Political & Governance Instability’ has been ranked at No. 6 in the IRS 2016 this year. The ranking of this risk this year points towards the direction of combining government policies, and industrial and business demands with the same package of big-ticket economic reforms currently underway in India. The recent policy changes, such as proposed introduction of Goods and Services Tax and approval of Foreign Direct Investment in multi-brand retail etc., will create a positive environment for business in the country and will help in reducing the risk of ‘Political & Governance Instability’. Another area of concern voiced by various industry bodies is retrospective tax demands served on many multinational corporations. The pro-reform policies of the present government will, however, go a long way to instill long-term confidence and in turn boost economic growth.
OVERALL RISK RANKING – YEAR-WISE TRENDS:
The above figure indicates that the top five risks that impacted the Indian business environment over the last year include, ‘Strikes, Closures & Unrest’, ‘Information & Cyber Insecurity’, ‘Crime’, ‘Terrorism & Insurgency’, and ‘Corruption, Bribery & Corporate Frauds’. ‘Corruption, Bribery & Corporate Frauds’, which held the No. 1 position in the 2015 and 2014 survey results, has slipped to No. 5 positon this year. The rise of ‘Strikes, Closures & Unrest’ can be attributed to major unrests in the form of the Jat and Patel (to name a few) demand for reservations in education and government jobs, etc., in the last few months along with the persistent threat of labour unrest in manufacturing zones. ‘Information & Cyber Insecurity’ has maintained its second rank in this year’s survey as well.