NITI Aayog launches Ease of Doing Business Report

• NITI Aayog has launched “Ease of Doing Business” report.
• The main purpose of this report was to assess the business regulations and enabling environment across India from firms’ perspective.
•  The Ease of Doing Business report based on an Enterprise Survey of 3,500 manufacturing firms Survey comes in the backdrop of the fact that India needs to create an environment that fosters globally competitive firms, capable of driving and sustaining economic growth.

Highlights of report:
Economic Performance and Reforms: A higher level of economic activity and better performance on a range of doing business indicators are strongly correlated.

• Enterprises in high-growth states are significantly less likely to report major or very severe obstacles in (i) land/ construction re­lated approvals, (ii) environmental approvals and (iii) water and sanitation availability relative to enterprises in low-growth states.
• Quite remarkably, firms located in high-growth states also report 25% less power shortages in a typical month, compared to firms in low-growth states.

Improvements over time: Newer and younger firms re­port a more favorable business environment in that they take less time in obtaining approvals than older firms, suggesting an improvement in the business environment.

• Newer firms include startups established after 2014.
•  In addition, young firms report that most regulatory processes do not constitute a major obstacle to their doing business.

Informational gaps: States need to enhance awareness of the steps being undertaken by them to the improve ease of doing business. The survey data show low awareness among enterprises about single window systems, instituted by states.

• On aver­age, only about 20% of start-ups, which are of recent origin, report using single window facilities introduced by state governments for setting up a business.
• Even among experts, only 41% have any knowledge of the existence of these facilities.

Labor regulations are a bigger constraint for labor intensive firms. We find that labor intensive sectors, that create proportionately more jobs per unit of capital investment, feel more constrained by labor related regulations. For example, compared to other enterprises, the enterprises in labor intensive sectors:

• 19% more likely to report that finding skilled work­ers is a major or very severe obstacle.
• 33% more likely to report that hiring contract labor is a major or very severe obstacle.
• Lose a greater number of days due to strikes and lockouts.
•  Report higher average time for environmental approvals and longer power shortages.

Barriers to firm growth: The experience of firms with fewer employees is different from that of larger firms. In some cases, large firms face more regulatory barriers than smaller firms.

• Firms with more than 100 employees took significantly longer to get necessary approvals than smaller firms with less than 10 employees.
• Large firms were also more likely to report that regulatory obstacles were a major impediment to doing business and that they incurred higher costs for getting approvals.

By: Vishal