According to World Bank’s annual report on the ease of doing business, ‘Doing Business 2018: Reforming to create jobs’, India is ranked 100th out of 190 countries and has moved up by 30 ranks on the World Bank’s ease of doing business ranking this year.
“Doing Business 2018: Reforming to Create Jobs ” finds that entrepreneurs in 119 economies saw improvements in their local regulatory framework last year. Between June 2016 and June 2017, the report, which measures 190 economies worldwide, documented 264 business reforms. Reforms reducing the complexity and cost of regulatory processes in the area of starting a business and getting credit were the most common in 2016/17. The next most common reforms were in the area of trading across borders.
a. Highlights of the EoDB 2018:
Brunei Darussalam, Thailand, Malawi, Kosovo, India, Uzbekistan, Zambia, Nigeria, Djibouti and El Salvador were the most improved economies in 2016/17 in areas tracked by Doing Business. Together, these 10 top improvers implemented 53 regulatory reforms making it easier to do business. While New Zealand and Singapore retained their top ranks for ease of doing business
Economies in all regions are implementing reforms easing the process of doing business, but Europe and Central Asia continues to be the region with the highest share of economies implementing at least one reform—76% of economies in the region have implemented at least one business regulatory reform, followed by South Asia and Sub-Saharan Africa.
The report features four case studies in the areas of starting a business, dealing with construction permits, registering property and resolving insolvency, as well as an annex on labor market regulation.
b. Analysis of India’s Rankings on Doing Business Indicators
This edition of the report acknowledges India as a top improver, with an improvement of 30 ranks compared to last year’s report, the highest jump in rank of any country in the DB Report, 2018. India is the only country in South Asia and BRICS economies to feature among most improved economies of the Doing Business Report this year. The World Bank report covers the period from June 2, 2016 to June 1, 2017.
India has improved its rank in 6 out of 10 indicators and has moved closer to international best practices (Distance to Frontier score). The credit for this significant improvement is credited to the mantra of “Reform, Perform, Transform” given by the Hon’ble Prime Minister Shri Narendra Modi, wherein a strong leadership has provided the political will to carry out comprehensive and complex reforms, supported by a bureaucracy committed to perform.
The Government has undertaken an extensive exercise of stakeholder consultations, identification of user needs, government process re-engineering to match Government rules and procedures with user expectations and streamlined them to create a more conducive business environment. An extensive exercise is also undertaken to increase awareness among users about reforms to ensure extensive use of newly created systems.
The World Bank release stated that India continues to perform well in the areas of Protecting Minority Investors, Getting Credit, and Getting Electricity. The findings of the report underline how initiatives by both the states and the Centre are crucial. India mostly lags in parameters where state government interference is maximum: registering a property, starting a business or getting an electricity connection.
On the basis of analysis of India’s Ease of Doing Business Ranking during the year 2016 and 2017, it is observed that despite there was an improvement in the Distance to Frontier score of India from 53.93 in 2016 to 56.05 in 2017, India’s rank remained stagnant at 130th position due to comparative improvements in the rankings of other economies. However, India’s doing business ranking in the year 2018 is improved by 30 positions along with significant improvement in The DTF score.
Following provides a detailed analysis of India’s Doing Business ranking parameter wise:
1. Starting a business – Although India made starting a business faster by merging the applications for the Permanent Account Number (PAN) and the Tax Account Number (TAN) and by improving the online application system. However, India still lags in area of Starting a Business as the number of procedures is still cumbersome for local entrepreneurs who still need to go through 12 procedures to start a business in Mumbai, which is considerably more than in OECD high-income economies, where it takes five procedures on average.
2. Dealing with Construction permits – Slight improvement in the India’s ranking from 185 in 2017 to 181 in 2016. India made dealing with construction permits less cumbersome by implementing an online system that has streamlined the process at the Municipality of New Delhi and Municipality of Greater Mumbai. The online system has streamlined the process of obtaining a building permit, thereby reducing the number of procedures and time required to obtain a building permit in India.
3. Getting electricity – Significant improvement in the ranking in the past 4 years starting from 2015 till 2018 with the efforts to get electricity faster and cheaper by streamlining the process of getting a new commercial electricity connection. However, in comparison to previous year’s ranking, 2018 getting electricity ranking registered a slight increase from 26 to 29.
4. Registering property – Major slip in ranking in the category of registering property from 138 last year 2017 to 154 this year 2018 due to increase in time taken, cost and number of procedures for registration.
5. Getting credit – With regard to access to credit, India’s rank improved by 15 positions from 44 in 2017 to 29 in 108 due to the improvement with amendment in the rules on priority of secured creditors outside reorganization proceedings and by adopting a new law on insolvency that provides a time limit and clear grounds for relief to the automatic stay for secured creditors during reorganization proceedings.
6. Protecting minority investors – Remarkable improvement in the ranking which dipped to 13 in 2017. India’s rank at 4th position in protecting investors in 2018 can be attributed to strengthened minority investor protections by increasing the remedies available in cases of prejudicial transactions between interested parties.
7. Paying taxes – Major improvement in the ranking from 172 in 2017 to 119 in 2018. India made paying taxes easier by making payment of EPF mandatory electronically and introducing a set of administrative measures easing compliance with corporate income tax.
8. Trading across borders – Although there is a slight dip in the ranking from 143 in 2017 to 146 in 2017. However, India reduced import border compliance time in Mumbai by improving infrastructure at the Nhava Sheva Port. Export and import border compliance cost were also reduced in both Delhi and Mumbai by eliminating merchant overtime fees and through the increased use of electronic and mobile platforms.
9. Enforcing contracts – The ranking improved by India made enforcing contracts easier by introducing the National Judicial Data Grid, which makes it possible to generate case measurement reports on local courts.
10. Resolving insolvency – Commendable improvement in the ranking from 136 in 2017 to 103 in 2016 since India made resolving insolvency easier by adopting a new insolvency and bankruptcy code. This code introduced a reorganization procedure for corporate debtors and facilitated continuation of the debtor’s business during insolvency proceedings.
Going ahead, it will be highly essential to tackle the reforms which are facing implementation challenges on ground so as to sustain the momentum towards a higher ranking or the dream of being under 50 by next year. Further, the role of states in the implementation of reforms will be a major game changer in deciding the overall Ease of Doing Business scenario as a whole. In the end, it is hoped that the remarkable improvement in India’s ease of doing business rankings are in correlation with the on-ground business realities.