India’s Phenomenal Jump In Ease Of Doing Business

The World Bank has lauded India’s sustained business reforms over the past four years enabling it to leapfrog 23 slots in one go to move to 77th position in business regulations across 190 economies this year.

India deftly carried out six business reforms during the past year, earning brownie points to emerge as a top global improver for a second consecutive year, according to the World Bank Group’s “Doing Business 2019:Training for Reform” report, released in Washington. Last year India was ranked at 100.

The latest clutch of reforms were in the Doing Business areas of Starting a Business, Dealing with Construction Permits, Getting Electricity, Getting Credit, Paying Taxes, and Trading Across Borders. On the measure of absolute progress towards best practices, India significantly improved its Doing Business score to 67.23, up from 60.76 last year.

Hailing the report, the Union Finance Minister Arun Jaitley said Prime Minister Narendra Modi had set a target of breaking into the top 50 soon after coming to power in 2014 and its jumbo leap from 142 to 77 in 2018 makes it a phenomenal progress. He was optimistic that if parameters including time taken to start a business, registering a property, enforcement of contracts, paying taxes and insolvency laws are improved, as they are distinctly set to, the target could be reached very soon. Incidentally, an output-outcome document of the Government mandates the country to reach 30th position by 2020.

During the past year, India made starting a business easier by fully integrating multiple application forms into a general incorporation form. India also replaced the value added tax (VAT) with the Goods and Services Tax (GST) for which the registration process is faster in both Delhi and Mumbai, the two cities measured by the Doing Business report. Mumbai abolished site inspections for registering companies under the Shops and Establishments Act. As a result, the time to start a business has been halved to 16 days, from 30 days.

With streamlining of processes, India has made it faster and less expensive to obtain a construction permit while also improving building quality control by introducing decennial liability and insurance. The cost for completing all procedures to build a warehouse has been slashed to 5.4 percent of the warehouse value, from 23.2 percent earlier, while the total time needed for obtaining a permit has been reduced to 95 days, from 144 days. India’s continued efforts to make ‘Dealing with Construction Permits’ easier has this year catapulted the country to a global rank of 52, from 181 last year.

India made ‘Paying Taxes’ easier by merging diverse sales taxes into the single GST. India’s imports and exports too were made more efficient for a third consecutive year. The latest reform initiatives included electronic submission of documents and upgrading of port infrastructure. As a result, the time needed for exporters to comply with documentation requirements has been reduced to 14 hours, from 38 hours.

It is to the lasting credit of India that it now ranks in the top 25 in the world on three major indicators—getting electricity, getting credit and protecting minority investors.

This year, Doing Business collected data training of customs clearance officials and brokers and found that training resulted in lower documentary compliance time, thereby, easing the movement of goods across borders.

Ultimately the government’s aim is to monitor ease of doing business at the district level. Mr. Jaitley asserted that this would enable the country to improve at micro-levels and that would have a bearing on the bigger macro picture. This is bound to make India the destination of overseas investors. Commerce & Industry Minister Suresh Prabhu has contended that “the government will get out of business and allow people to conduct their business”, the signals are clear that India’s efforts to reach pole position in terms of ease of doing business would surely place the country on an accelerated growth trajectory.

Script: G. Srinivasan, Senior Economic Journalist