By Suranjana Roy
India has jumped 30 spots on the World Bank’s ease of doing business ranking list for the year 2018 to secure a place among the top-100 countries. India’s spurt was the biggest jump among all countries, as stated by Finance Minister Arun Jaitley in his press conference. According to official sources, as many as 18 states have claimed a 100% score in implementing a 372-point reforms agenda on ease of doing business. Interestingly, no state has ever scored 100% since the ranking was started in 2015 to foster a more competitive business environment.
The ease of doing business, created by Simeon Djankov of the World Bank Group, along with professors Oliver Hart and Andrei Shleifer, ranks countries based on regulations for businesses and protection of property rights. The economic growth impact of improving these regulations is strong, according to research initiated by the World Bank, based on regulations detailed in the Doing Business project. Interestingly, since the start of the project in November 2001, more than 3,000 academic papers have used one or more indicators constructed in Doing Business and the related background papers.
While the World Bank has been tasked with the process of calculating the Index, the Department of Industrial Policy and Promotion (DIPP) oversees the process, sets the reform agenda, and often acts as a facilitator between the World Bank and states.
Methodology for the study and ranking
The World Bank records feedback on 78 questions covering various aspects of the ease of doing business, which is enveloped in 10 different indicators carrying equal weight. These are starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency. The survey conducted by the World Bank covers 190 global economies with these 10 economic indicators, and India has improved its standing in six out of these 10 indicators, with Jaitley further stating that India had secured the 29th spot in terms of getting electricity connection for a business.
India has also improved its standing to 103 in terms of resolving insolvency, which is an astounding jump from its previous rank of 136. Jaitley also stated that India has made the biggest jump under tax reforms, moving up 53 places to 119, while also being ranked number four in terms of protecting minority shareholders, which is a big high for India’s business spectrum.
The Indian states were simultaneously ranked on a dozen parameters on the ease of doing business, such as inspection enablers, single-window system, land availability and allotment, labour regulations, obtaining utility permits, access to information and transparency enablers, construction permits, registering property, paying taxes and contract enforcement.
What the findings revealed about Indian states
The states that have claimed the perfect score this time include West Bengal, Karnataka, Andhra Pradesh, Telangana, Gujarat, and Haryana. In 2016, Andhra Pradesh and Telangana jointly topped the list, with a 98.78% score on a 340-point reforms agenda, closely followed by Gujarat, while in 2015, Gujarat had grabbed the first position, with a 71.14% score. So far, four states—Haryana, West Bengal, Jharkhand, and Karnataka—have secured the first position with a 90.79% score.
The report noted that the joint application for the Mumbai Value Added Tax (VAT) and the Profession Tax (PT) also was fully implemented in January 2017. Also, India strengthened entrepreneurs’ access to credit by formatting the rules on the priority of secured creditors outside reorganisation proceedings. It also adopted a new insolvency and bankruptcy code that introduced a reorganisation procedure for corporate debtors. In terms of international cargo trade, India reduced border compliance time by improving infrastructure at the Nhava Sheva Port in Mumbai, while export and import border compliance costs were also reduced in both Delhi and Mumbai. Increased use of electronic and mobile platforms since July 2016 has also enabled importers to clear cargo faster through simplified customs procedures under the Authorised Economic Operator (AEO) program.
However, the biggest tax reform in the country, Goods and Services Tax, was not factored in by World Bank into this survey since June 1 is the cutoff date for ranking economies on the basis of the 10 specified parameters. Jaitley mentioned that GST will be factored in the ease of doing business ranking in the next year, which will help to further improve the ranking.
Commenting on India’s unprecedented performance in ease of doing business, Prime Minister Narendra Modi stated, “The government has undertaken an extensive exercise of stakeholder consultations, identification of user needs, government process re-engineering to match government rules and procedures with user expectations and streamline them to create a more conducive business environment. The report acknowledges India as a top improver with the highest jump in the rank of any country in Doing Business Report, 2018. India is the only country in South Asia and BRICS economies to feature among most improved economies of the Doing Business Report this year.“
In addition to these highpoints in the report, India has been ranked 164 in Enforcement of Contracts, 181 in Construction Permits, and 156 in Starting a Business. Additionally, India is the only major economy to feature in the list of 10 countries which, according to the World Bank, have taken structural economic reforms. On the reverse side, however, Brazil is the only BRICS nation below India in terms of the ease of doing business rankings.
Featured image source: Pixabay
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