India had consistently been one of the stragglers in the past years in the World’s Ease of Doing Business Index and this can mainly be attributed to the nation being one of the toughest places to conduct business due to red tapism and various hurdles that the policies and regulations posed.
However, in 2017, India unprecedentedly climbed 30 notches, positioning itself on rank 100 from 2016’s 130. And in the year 2018, it rose 23 places and achieved rank 77 in World’s Ease of Doing Business Report. India further aims to get into top 50 list in the coming years.
Ease of Doing Business
The World’s Ease of Doing Business ranking compares economies among various countries. A high ease of doing business ranking implies that the regulatory environment of a particular country is more conducive to commencement and operation of a new firm.
The rankings are based on 10 indicators:
- Starting a business
- Dealing with construction permits
- Getting electricity
- Registering property
- Getting credit
- Protecting minority investors
- Paying taxes
- Trading across borders
- Enforcing contracts
- Resolving insolvency.
The ‘Ease of Doing Business’ ranking is also one of the factors which foreign investors consider when seeking destinations for their funds. It also indicates the climate of businesses within the nation.
Where does India stand in ‘Ease of doing Business’ ranking?
With the continues effort put by the Government, India, in the latest World’s ‘Ease of Doing Business’ Report, jumped 23 places from 2017’s 100th rank, positioning itself at 77th. Out of the 10 indicators, India has improved its ranks in six, the most dramatic improvements being made in the ‘Construction permits’ and ‘Trading across Borders’. In the former, India’s rank improved by 129 in just one year (181 to 52 in 2018). It’s ranking in ‘Trading across Borders’ improved from 146 in 2017 to 80 in 2018, making a leap of 66 ranks. Among the South Asian countries, India ranks first. The World Bank has acknowledged India as one of the top improvers for two consecutive years.
Draft policy on National Ease of Doing Business
The Department for Promotion of Industry and Internal Trade (DPIIT), as part of a draft cabinet note, has made proposals on a series of reforms with its aim to position India among the top 50s in the World’s Ease of Doing Business in the coming years.
The government’s ease of doing business policy aimed to relinquish the mandatory licensing requirements for businesses to make it easier for them to conduct business. The draft policy implied that the ministries and departments will be asked to evaluate on whether the licensing process should be removed and replaced by a simple registration process. It has further suggested renewal agreements for those cases whose license requirement cannot be removed. If the renewals are too frequent, the departments maybe inquired wherein they will have to give proper reasoning for justification. They will also be asked to assess the time taken by the businesses to comply with the policy and the cost incurred by them. The ministries will be required to come up with plans to mitigate the compliance burden vis-à-vis cost and time. For this, monthly consultations will be taken between both ministries and industry stakeholders.
The government, with its new cabinet note, is endeavouring to bring all its departments under the objective of improving ease of doing business environment through a holistic approach. The motive behind the draft cabinet note goes beyond the idea of pushing India’s ranking in the World’s ‘Ease of Doing Business’. With a decline in country’s economic growth and increase in unemployment rate, the initiative aims to tackle those issues. Additionally, it also targets to attract more foreign investment as the FDI equity inflows have sagged in the recent years.