Explainer: How India jumped 23 spots on the World Bank’s ‘ease of doing business’ index this year

By Prarthana Mitra

India has jumped 23 places to rank 77th out of 190 countries in the World Bank’s ‘ease of doing business’ index released on Wednesday.

Marking an improvement in 6 out of 10 indicators including ease of getting credit, construction permits, protection for minority investors, and cross-border trade, India’s climb up the table began in 2016, when it ranked 100th and arrives on the heels of several reforms related to insolvency and taxation.

The World Bank further put India among the top 10 economies to register the most improvement in the recent future, a prediction that arrives in the nick of time before the upcoming general elections, campaigning for which has begun in full swing. India was floundering in the 142nd position when the Narendra Modi government came to power in 2014.

Here’s how India made the jump

According to the World Bank’s report, India made starting a business easier by streamlining several business processes and integrating multiple application forms into a general incorporation form. The controversial Goods and Services Tax (GST) also reportedly hastened the registration and tax payment, by replacing many indirect taxes with a single indirect tax.

Further, India was able to cut costs and time consumption in export and import with the help of electronic sealing of containers, upgrade in port infrastructure and online submission of supporting documents. Today, obtaining a building permit is faster and cheaper too.

Acknowledging the role of an insolvency framework in debt recovery, the report said that debt recovery tribunals in India have contributed to the decrease in non-performing loans by 28 percent and lowered interest rates on larger loans. However, the improvement in ‘getting credit’ by 7 points has become a touchy issue after the latest dispute between primary lender RBI and the centre, which wants to relax lending restrictions to PCA banks and SMEs further despite the central bank’s reluctance.

Reactions

The official statement from the Commerce and Industry Ministry applauded the ‘significant’ jump, calling it “a rare feat for any large country of the size of India.”

“This is a big positive for the economy, and indicates the pace of reform measures underway,” Richa Gupta, senior director of Deloitte India, told FirstPost. She accredited the improvement in ranking to relaxation in FDI rules, the existing GST and the Insolvency and Bankruptcy Code (IBC). Besides the investor-centric online single window model for providing faster clearances and filing compliances were definitely noted by the World Bank, she believed. Furthermore, India gained the most points in trading across borders which reflects a consistency in resolving barrier issues and bilateral relations, she said, adding that the growth is most likely to continue at this rate.

Prime Minister Narendra Modi spoke of the achievement from a summit in Japan, saying, “When I took over the responsibility of the government in 2014, India was at 140th position in the World Bank’s Ease of Doing Business rankings. Now, India has reached 100th position, and we are working towards a better ranking.” An internal “ease of doing business ranking” for Indian states and Union Territories may be on the cards for a greater incentive.

About the index

The annual ‘ease of doing business’ index ranks 190 countries based on 10 parameters like starting a business, getting construction permits, electricity and credit, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.

The two most populated economies in the world, China and India, have demonstrated impressive reform agendas, the World Bank said. New Zealand led the index followed by Singapore, Denmark, and Hong Kong. The US emerged as the eighth easiest place to be doing business in while neighbouring China and Pakistan were ranked 46th and 136th respectively.


Prarthana Mitra is a staff writer at Qrius