Doing Business in India — Becoming Easier Now

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doing business
Ease of Doing Business in India

Today, doing Business in India has become much easier. As per the World Bank’s Ease of Doing Business Index, 2017, India ranked 100 out of 190 countries for the first time in the history. India improved 30 ranks from last year’s ranking. It is the fifth best jump in rankings for India after Brunei, Thailand, Malawi and Kosovo during the period from June 2, 2016 to June 1, 2017.

The World Bank’s Ease of Doing Business Index refers to the regulatory environment in a country to set up and operate a business. Every year, the World Bank compares the business environment in 190 countries in this index. The evaluation for the ease of doing business ranking is very tough. The ranking does not reflect the reform measures unless the outcome is visible on the ground. Year after year, persistent efforts have to make after identifying areas of improvement. This needs a lot of government commitment not only at national level but also at local level at every layer of government.

From the past many years, India is ranked at low in World Bank’s Ease of Doing Business index as shown in Table 1. Even in 2015 and 2016, India remained at the same rank. In 2017, China’s ranking remained unchanged for a second year at 78 whereas India improved its all-time ranking to 100th.

Table 1: Comparison of Ranking of BRICS Countries in Ease of Doing Business Index

Year Brazil Russia China South Africa India
2006 121 96 93 29 134
2012 130 112 91 39 132
2014 120 62 90 43 142
2015 116 51 84 73 130
2016 123 40 78 74 130
2017 12 35 78 82 100

Source: Compiled from various issues of Doing Business Reports, the World Bank.

Note: A lower rank indicates better performance, whereas a higher rank indicates worse performance.

The ranking in the ease of doing business are based on a country’s performance on 10 parameters such as starting a business, enforcing contracts, resolving insolvency, registering property, among others. In 2017, India has improved its rank in six out of 10 parameters including protecting minority investors, paying taxes, cross-border trade and resolving insolvency (as shown in Table 2 below). This is due to various reforms implemented by the Modi government in last one year (June 2016 to June 2017). These include reduction in corporate tax from 30 per cent to 25 per cent for domestic companies; implementation of Goods and Services Tax (GST), removal of minimum paid up capital; enactment of Insolvency and Bankruptcy Code, introduction of single window system for clearances, etc.

Table 2: Comparison of India’s Improvement over Different Parameters in Different Years

Parameters 2009 2014 2016 2017
Protecting Minority Investors 41 7 13 4
Getting Credit 30 36 44 29
Resolving Insolvency 138 137 136 103
Paying Taxes 169 156 172 119
Enforcing Contracts 182 186 172 164
Dealing with Construction Permits 175 184 185 181
Starting a Business 169 158 155 156
Registering Property 93 121 138 154
Trading across Borders 94 126 143 146
Getting Electricity N.A. 137 26 29

Source: Compiled from Doing Business Report (2010, 2015, 2017, 2018), World Bank, available at http://www.doingbusiness.org/reports.

In four parameters of doing business such as starting a business, registering property, getting electricity and trading across border, India still lag behind (see Table 2 above). The major reason behind this is that these issues are being regulated by different agencies across the three tiers of government such as central, state and local. For example, for starting a business, registration and other clearances are granted by central ministries such as Ministry of Finance and Ministry of Corporate Affairs. Electricity and water connections for a business are granted by the state electricity and water boards. The municipal corporations grant building permits and various other no-objection certificates.

Overall, it can be said that India’s impressive performance signals that India is moving in the right direction and can achieve the target of coming among top 50 countries over the next few years. Today, India is almost closer to global practices in regulatory framework for doing business.