Ease of doing business index

•  As per the World Bank’s 2017 ranking, India ranked 130 amongst 190 countries in ease of doing the business index. Though there have been a slight improvement and India has inched up one place from its last year ranking in the same survey.
• The list of countries in the Doing Business 2017 is topped by New Zealand while Singapore is ranked second. It is followed by Denmark, Hong Kong, South Korea, Norway, the UK, the US, Sweden and former Yugoslav Republic of Macedonia.

India and ease of doing business:

• The World Bank ranks countries on 10 parameters: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority shareholders, paying taxes, enforcing contracts, trading across borders and resolving insolvency.
• Among these, India’s position deteriorated on all parameters apart from getting electricity, enforcing contracts and registering property. The country continued to improve the most in getting electricity connection, with its ranking soaring from 51st last year to 26th in the latest report. However, the two other parameter recording positive movement, that of enforcing contracts and registering property still places India 172nd and 138th, respectively, among all nations.
• India ranking also continued to weaken in areas of strength like protecting minority investors — went down to 13th position from 10th position in the previous year — and getting credit — 44th position from 42nd position in the previous year.

Analysis:

• The reason why there is no real movement in the ranking is more to do with the fact that other countries are also moving. In absolute terms India, does improve significantly. There aren’t many countries that improved more than India in terms of absolute number.
• India government has taken many steps in order to make doing business easy in India. In order to simplify the process of starting a business the government launched an “e-biz” portal that integrates 14 regulatory permissions in one place. The portal is aimed at providing companies a one-stop shop for receiving all clearances, which has reduced the total number of days required to start a business from 29 to 12 in the past year.
• India has reduced the number of mandatory documents for export and import from seven and nine, respectively, to just three. Physical submission of documents for export and import is no longer required; they can be submitted electronically using digital signatures. To commence business operations the provision of minimum capital requirement, which was 111.2% of income per capita, has been eliminated in 2015. Also entrepreneurs have been provided a viable option to apply for Industrial License (IL) via a website, which has lead to simplification in payment of taxes.
• Initiatives for investors: Through a slew of reforms the government has opened up almost all the major sectors of the economy to Foreign Direct Investment (FDI), which has resulted in India becoming one of the most open economies in the world. To assist and handhold investors during the entire life-cycle of the business an Investor Facilitation Cell has been created at the state and district levels.
• Along with this, the rules of acquisition are being tweaked to make it more attractive for investors to acquire distressed companies; Securities and Exchange Board of India (SEBI), the Indian capital markets regulator, is considering a proposal to spare investors from making open offers to the minority shareholders of distressed companies where they may seek to take control.
• Other than just investing or acquiring business organizations, India has amended the insolvency and bankruptcy code to make it easier for investors to exit businesses. Currently it takes more than four years to resolve an insolvency issue in India and the upgraded bankruptcy code proposes to bring it down to less than a year.
• To improve its ability to enforce contracts, government has brought in amendments to the Arbitration and Conciliation Act as well as commercial courts to ensure faster settlement of commercial disputes and reduce litigation. The country is seeking to set up courts to exclusively handle commercial disputes, with an objective to fast-track the whole legal system.
• “Make in India” initiative of government aims to make India become a hub for design, innovation and manufacturing. As part of this initiative 25 sectors have been identified where India has core competencies to become a global champion. Along with this the government has announced “Start-up India, Stand-up India” and “Digital India” campaigns; to ensure that these measures percolate to state level a ranking system has been introduced amongst states that gives impetus on investment on infrastructure.
• But, one of the obstacles on this path includes trimming and transforming India’s cumbersome bureaucracy into efficient machinery, which can prove to be not an easy task. However improving ease of doing business in India is still a work in progress, therefore the government must continue in its attempts to undertake reforms to build consistency, predictability, transparency and clarity in all procedures, rules and policies.

By: Vishal