Insights into Editorial: India ease of doing business rank jumps 23 places to 77 in World Bank’s Doing Business 2019 survey
Context:
India’s rank in the World Bank’s Ease of Doing Business 2019 survey climbed 23 places to 77 among 190 countries surveyed, making it the only country to rank among the top 10 improvers for the second consecutive year.
Last year, India saw a record jump of 30 places to reach the 100th position in the rankings.
New Zealand topped the list of 190 countries in ease of doing business, followed by Singapore, Denmark, and Hong Kong.
The United States is placed eight and China has been ranked 46th. Neighbouring Pakistan is placed at 136.
Areas where Ease of Doing Business Concentrate:
Ease of doing business: Harmonization of laws, procedures and rates of tax, will improve environment of compliance as all returns to be filed online, input credits to be verified online reducing need to deal with different tax authorities. It would also discourage mere ‘invoice shopping’.
This is a dynamic process and it reflects performance in various parameters for doing business in comparison to other countries.
The sharp rise in the ranking will burnish the reformist credentials of the present government.
- Number of days taken to Start a Business dropped from 30 to 16.
- Number of days taken to obtain Construction Permits dropped from 144 to 95.
- Border compliance for exports dropped from 106 to 66 hours.
- Border compliance for imports dropped from 264 hours to 96 hours.
- In the electricity sector, the time taken for obtaining a new connection has reduced from 105 to 55 days.
Further, India now ranks in the top 25 in the world on three indicators–
- Getting electricity,
- Getting credit and protecting minority investors,
- Department of industrial policy and promotion.
In dealing with construction permits, India has implemented an online single window system, introduced deemed approvals and reduced the cost for obtaining these permits.
For resolving insolvency, India has put in place a new Insolvency and Bankruptcy Code and time bound reorganization procedure for corporate debtors.
What will be the outcome of this Ease of Doing Business Index report?
- It is significant for countries like India, where foreign investors and Governments look at the investor friendly measures and this index is considered to be the one which reflects the ground reality.
- In today’s capitalistic society (market economy with safeguards for vulnerable sections), this assumes significance as FDI flows are considered necessary for growth of emerging economies.
- Multilateral lending institutions like World Bank, IMF look at these parameters and suggest measures for improvement before giving financial help to the emerging economies/under developed countries.
- Simplifying FDI process by abolishing FIPB (Foreign Investment Promotion Board) as a result, more than 90% of FDI inflows are now through automatic route.
However, the report does not truly represent the status of economic reforms taken by India. For instance:
- One particular change in the ranking methodology seems to have done considerable damage to India’s improvement prospects.
- India ranks fourth from the bottom under the header “paying taxes”. Inclusion of new criterion ‘post-filing index’ has much to contribute to this.
- The rankings cover only the two cities of Delhi and Mumbai. However, the reforms are being carried on all across India. In fact, states like Andhra Pradesh, Telangana have done remarkable efforts in economic reforms.
- There is increasing competition from other countries who are trying to improve their rankings as well.
- India has recommended the World Bank that reforms undertaken in the entire country and not just in Delhi and Mumbai be considered for the “Ease of Doing Business” Index.
Conclusion:
India saw a similar improvement in the “trading across borders” section to 80th position from 146th a year ago.
Other Initiatives like digitization, e-visas, infrastructure status to Logistics, Start-up India, announcement of National Intellectual Property Rights (IPR) policy.
This improvement was made possible by:
- Reducing the time and cost to export and import through various initiatives, including the implementation of electronic sealing of containers,
- Upgrading of port infrastructure and allowing electronic submission of supporting documents with digital signatures under its National Trade Facilitation Action Plan 2017-2020.
India is the one of only nine countries around the world and only one in BRICS to feature in this list.
Way Ahead:
While vigilance is the call of the hour, we should also recognize that a improved in ranking is not an end in and of itself.
For attracting new investment, both foreign and domestic, several macroeconomic issues have to be addressed.
These include political and economic stability, law and order maintenance, quality physical infrastructure, and buoyancy in financial markets.
Major institutional and governance reforms not covered in the World Bank study remain prerequisites for new businesses to start and grow.
India may have the advantage of a large domestic market, and our efforts to improve our ease of doing business rankings may be finally yielding results, but there is still a lot of work ahead.
