India Jumps to 100th Rank In Ease of Doing Business Report

India moved up 30 ranks in the World Bank’s ‘Ease of Doing Business’ report for 2018. It ranks 100th out of 190 countries, up from 130 in the 2017 report.

India’s distance to frontier score has also improved to 60.76 from 56.05. The distance to frontier is an absolute measure that shows how far a country is from the best-ranked country in each parameter considered in ease of doing business ranking.

India registered its highest ever increase in the rankings on the back of bold reform initiatives. India is among the top 10 improvers in the world. It is also the biggest gainer in South Asia.

The World Bank assesses a country’s performance on 10 parameters and ranks them accordingly. The ranking has been shown in the table:

India has implemented reforms in 8 of the above parameters to improve its ranking. The steps initiated by the Indian Government are following (as mentioned in the World Bank report):

Note: The rankings are based only on 2 cities for countries that have a population of more than 100 million. In India, the ranking is based on Delhi and Mumbai.  (Read: Ease of Doing Business Index India: 2017)

1. Starting a Business: 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. This reform applies to both Delhi and Mumbai. Mumbai also made starting a business faster by merging the applications for the value-added tax (VAT) and the profession tax. Note: The GST reform has not been incorporated in the ranking.

2. Dealing with Construction Permits: India made dealing with construction permits less cumbersome by implementing an online system at the Municipality of New Delhi and Municipality of Greater Mumbai. The online system has streamlined the process of obtaining a construction permit, thereby reducing the number of procedures and time required to obtain a construction permit in India. But, our relative rank worsened in this category and we still have a long way to go.

3. Getting Credit: India strengthened access to credit by amending the rules on priority of secured creditors outside reorganization proceedings and by adopting a new law on insolvency. This reform applies to both Delhi and Mumbai.

Credit access is expected to improve further with the recent Rs. 2.11 trillion recapitalisation of banks. (Read: The Bank Recapitalisation Explained)

4. Protecting Minority Investors: India strengthened minority investor protections by increasing the remedies available in cases of prejudicial transactions between parties. This reform applies to both Delhi and Mumbai.

5. Paying Taxes: 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. This reform applies to both Delhi and Mumbai.

6. Trading across Borders: 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.

7. Enforcing Contracts: India made enforcing contracts easier by introducing the National Judicial Data Grid, which makes it possible to generate case measurement reports on local courts. This reform applies to both Delhi and Mumbai.

8. Resolving Insolvency: India made resolving insolvency easier by adopting a new insolvency and bankruptcy code that facilitated inefficient firms to exit the market. This reform applies to both Delhi and Mumbai.  (Read: Insolvency & Bankruptcy Code Explained)

The report has also mentioned about Labor Market Regulation. India increased the mandatory length of paid maternity. (Read: The Maternity Benefits Amendments- Explained)

The World Bank report stated that while there has been a substantial progress, India lags behind in areas such as starting a business (158), enforcing contracts (164) and dealing with construction permits (181).

The ranking is expected to improve further next year, as it will take into account Goods and services tax.

However, the ranking is not an end in itself. The World Bank ease of doing business rankings are not necessarily reflective of the country’s business environment.

Mary Hallward-Driemeier of the World Bank and Lant Pritchett from Harvard University have demonstrated in a study published in 2015, that these reports may not provide an accurate picture. (Reference: Post by Livemint).

Even then, the ranking is accepted and taken seriously by investors and countries around the world. Better ranking will help us to attract new foreign investments.

Reference:

//www.doingbusiness.org/reforms/overview/economy/India