Ease of Doing Business: India scores 100th ranking next year

Ease of Doing Business: India scores 100th ranking next year
Highlights

The finding made in the World Bank’s ‘Doing Business 2016’ report that improvements in the regulatory environment helped India in improving its position from last year’s 134 to 130 in the World Bank Doing Business 2016 ranking, which is four places higher and will serve as a shot in the arm for the Government, given vowed focus on economic development by Prime Minister.

The finding made in the World Bank’s ‘Doing Business 2016’ report that improvements in the regulatory environment helped India in improving its position from last year’s 134 to 130 in the World Bank Doing Business 2016 ranking, which is four places higher and will serve as a shot in the arm for the Government, given vowed focus on economic development by Prime Minister.


Last year’s report ranked India at 140 in the overall ‘ease of doing business’, but this year’s report features the recalculated 2015 rankings, in which India comes at 134 and has climbed to 130 this year, following a change in methodology. Among South Asian economies, India made the biggest improvement in business regulation, moving up in the ease of doing business ranking to 130.

Improving India’s ease of doing business ranking has been a focus area of the Narendra Modi government since May 2014 and India’s efforts to create a more conducive climate for business activity were “remarkable” and “substantial”, which came in for praise by Augusto Lopez-Claros, Director of the WB Global Indicators Group, pointing to a concerted efforts and determination by the Government authorities to improve the business environment.

And his comment that a continuation of the process is likely to yield substantial progress in the coming year serves as vindication that the government is going on the right track. Still, a closer look at the areas that need further loosening of regulations shows that government has its task cut out.

The release of report has come in at a time when BJP government has begun its 18th month in power. Questions persist as to whether the high expectations for economic reform, including specific hopes that the ease of doing business would improve, will be met with numerous initiatives facing obstacles to full passage and implementation.

The 2016 report found that while India has performed well on some indicators such as protecting minority investors, the improvement has been lacklustre on other important criteria such as enforcing contracts and registering property.

India ranks in the top 10 in Protecting Minority Investors (8), as its law grants minority shareholders strong protection from conflicts of interest and provides extensive rights to shareholders in major corporate governance.

India also improved its ‘distance to the frontier,’ a measure of a country’s absolute performance in an economy and the extent of improvement over time – has also advanced by two percentage points.

The significant improvement in two indicators, ‘starting a business’ and ‘getting electricity,’ pushed India up the ladder and it is easier to both start an enterprise and get electricity connection in Mumbai and Delhi, the two cities chosen for the Study.

Now, companies can get connected to the grid and get on with their business, 14 days sooner than before, based on the recently simplified procedures in vogue. The number of days it takes to start a new business has gone up marginally from last year, from 28.4 to 29 this year, but the report has taken note of other measures in the last year that made starting a business easier.

On the parameter of access to credit for a business has become marginally more difficult over the past 12 months, resulting in the ranking dropping six places. More worrying for policymakers are the stubbornly low distance-to-frontier scores for the two measures of enforcing contracts and dealing with construction permits.

Among the south Asian economies, only Bangladesh fares worse than India in the 189 nations on the list in resolving commercial disputes. And the region’s largest economy, by a distance, ranks a lowly seventh above war-torn Afghanistan on the ease of obtaining the approvals necessary to build.

Actually, the herculean task lies ahead to achieve the government’s goal of breaking into the top 50 rankings in order to make the country a favoured investment destination for foreign capital and spur domestic enterprise, if not it is possible for India to break into the top 100 rankings in the World Bank’s Ease of Doing Business listing within one year. Since, the improvement that India got this year is a pat on the back but it is also a reminder to buck up and carry on, because there is a great distance to go.

In that context economic experts comments that “These results do matter to India, especially from the point of view of global investors coming in with Foreign Direct Investment (FDI).As Investors would be “looking at eight or nine countries and trying to decide where they should go, their eyes quickly go to the ranking and where the country stands.”

They also commented “Even if a country has improved its frontier score, as India has, a failure to improve it beyond what its nearest-ranking-rivals have could lead to the country losing out on some investments”.

Compared to other countries India’s position is somewhat weak in some of the parameters, for instance, the strife-torn Palestinian enclaves of the West Bank and Gaza still rank one place above India, with both registering property and paying taxes far easier in the combined territories than in Asia’s third-largest economy.
Even the smaller Asian and South Asian economies of Indonesia and Sri Lanka significantly outscore India on several parameters, showing why businesses find it easier to invest in these countries. In this context, the Income Tax Department’s move to set up a panel of experts to simplify direct tax laws has come not a day too early.

With several key bills to broaden economic reforms — including the centrepiece Act to create a common market through the much-delayed Goods and Services Tax — stuck in a legislative logjam, the Government have to make more efforts to make it ‘Make in India’ campaign to be succeed to boost economic growth and to get the full impact of doing business reform it was “important for India to work on two other fronts, infrastructure such as ports, roads and railways and inclusiveness so that Indian can improve its ranking position in the coming year.
G.Rajendera Kumar
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