India Surges Ahead in 'Ease of Doing Business'

Published : Nov 15, 2017 11:55 am | By: M D Sridharan

Due to consistent efforts over the past few years, India surged ahead significantly in the World Bank’s global rankings on “Ease of Doing Business”.

India moved up by 30 positions in the World Bank’s global rankings on “Ease of Doing Business”.  In its latest report released last week, World Bank ranked India at 100 among 190 countries. Last year, India was ranked 130.  Indeed a sign of a progressive nation.

According to the Bank’s Ease of Doing Business 2018 report, India figures among the top 10 countries that have marked an improvement this year moving up in rankings of six out of 10 “Doing Business” indicators. The ease of doing business ranking compares economies with one another; the DTF score benchmarks economies with respect to regulatory best practice.

For the first time, India jumped a record 30 places to 100 in the Ease of Doing Business report for 2018, which is an influential 190-country barometer of competitiveness that many businesses likely consider for investment decisions.

Surely, the quantum jump in the world rankings is the result of the cumulative 

and sustained business reforms over the last four years.  Obviously jubilant about the rankings, Prime Minister Narendra Modi said that the “historic jump” is a testament to the “multi-sectoral reform push of Team India. Guided by the mantra of ‘Reform, Perform & Transform,’ we are determined to further improve our rankings and scale greater economic growth.” The Prime Minister invited the world to explore economic opportunities India has to offer.

Indian government has been focussed on reforms and since the Modi government came into office. Improving India’s ranking has remained a key component of PM Narendra Modi’s economic agenda. In September 2014, Prime Minister Narendra Modi at the launch of ‘Make in India’ had said that if the government brings transparency, India can move to 50th ranking. “If we have to come to 50 from 135, then Government alone can do this. If Government brings transparency in its decisions and rules, pushes works with simplicity we can occupy number 50 from 135 in ease of doing business,” he had said.

India featured among the ten most improved economies in the world in this year’s Doing Business rankings, accompanied by Brunei Darussalam, Thailand, Malawi, Kosovo, Uzbekistan, Zambia, Nigeria, Djibouti and El Salvador, the report said.

In the South Asia region, India now ranks below only Bhutan, which has a Doing Business ranking of 75. Other six countries have figure below India in the rankings, with Nepal at 105, Sri Lanka at 111, Maldives at 136, Pakistan at 147, Bangladesh at 177 and Afghanistan at 183.

Countries in sub-Saharan Africa region, however, have a higher ranking than India. Rwanda has 41st rank, Kenya has 80th rank, Botswana 81st rank and Zambia has 85th rank.

Doing Business report measures aspects of regulation affecting 11 areas of the life of a business, and India made eight reforms across these areas last year, the highest number for the country in a single year.  India is one of the three countries last year that undertook reforms in as many as eight areas. 

Interestingly the World Bank did not take in to account both demonetisation and GST. Since, the cut-off date for incorporating the reforms was June 1, GST was not a part of the report and as far as the demonetisation was concerned since it was a one-time and not comparable across countries being, it was also not considered, said the World Bank.

While acknowledging the “substantial progress” in rankings in the areas of protecting minority investors through tightening of securities regulations, improvement in rules related to businesses paying taxes and access to getting credit and resolving insolvency, the World Bank report revealed that  India still lags in areas such as starting a business (156), enforcement of contracts (164), dealing with construction permits (181) and registering property (154).

 Union Finance Minister Arun Jaitley  said the work done for protecting minority investors through changes in the Companies Act and facility of National Company Law Tribunal (NCLT) helped India move up to the 4th ranking among the 190 countries, while “online system for tax payments, filing returns and assessments” helped the country to move up 53 places to ranking of 119 for ‘paying taxes’.

“India made paying of taxes easier by requiring that payments are made electronically to the Employees Provident Fund and introducing a set of administrative measures for easing compliance with corporate income tax,” the report said.

On the areas in which India is  lagging behind,  Jaitley said, “Work is in progress and if we are able to expedite the work over the next few months in these areas, there is a huge scope for us to now jump up from this position number 100”.

Jaitley pointed out that in the very first year (of NDA government), Prime Minister Modi had said that our target should be to take India in first 50 and added that we have the capacity to further significantly improve our position and it is doable. The government is seriously looking at the areas that are still lagging behind to achieve 20-30 point improvement in the next one to two years.

According to the report, India has reduced the time needed to register a new business to 30 days now, from 127 days 15 years ago. However, the number of procedures to start a business stands at 12 which is considerably more than in high-income economies, where it takes five procedures on average,” the report said.

In the Doing Business report 2018, “distance to frontier metric,” the underlying metric of the Doing Business rankings, improved by over 8 per cent to 60.76 in 2018 from 56.05 in 2017.

For the lagging area of construction permits, since the municipal permits come under the purview of state governments, the government has nudged states to expedite municipal permits for construction and all the construction permits should be online which will cuts costs, eliminates discretion

Echoing the World Bank’s emphasis on the growth of small and medium enterprises which is important for job creation, Prime Minister Modi said ease of doing business is "critical for small businesses including small manufacturers" that provides the bulk of employment, makes them more competitive and reduces the cost of doing business.

The quantum improvement on this ranking means that life has become easier for the common people, the middle class, Modi said. "Because most of the parameters selected for this ranking are linked to the day-to-day life of people too. This is not just an ease of business ranking, it is also an ease of living life", Prime Minister Modi said.

India’s impressive performance also signals a possible turnaround in the country’s economic narrative after months of sluggish growth, helped largely by reforms in taxation, insolvency laws and access to credit that Prime Minister Modi pushed to boost investment and jobs.

India used to be the last among the BRICS - Brazil, Russia, India, China, and South Africa - countries in the ranking, but now it has overtaken Brazil in the list.  China maintained the same ranking it had last year, at 78. New Zealand, Singapore and Denmark retained their first, second and third spots. Russia, at 35 is the best among BRICS countries; while Brazil is now the last. 




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