INDIA HITS A CENTURY!! CLIMBS 30 SPOTS ON DB INDEX

about 1 year ago
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By Ruma Dubey

This year, India was targeting an ambitious 40 ranks jump in the World Bank’s Ease of Doing Business Index; this was despite us going up by only one rank in 2016 to 130 among 190 countries. The PM wanted to see India in the top 50 and thus the anticipation was nationwide, what with 2019 not too far away.

And these ambitions were not too way off the mark! India climbed up 30 spots to 100th ranking and World Bank has lauded the efforts, stating, “"India stands out this year as one of the 10 economies that improved the most in the areas measured by Doing Business."

The World Bank has lauded India’s efforts made on introducing the Insolvency Law, the resolve to correct the NPA situation, easing tax compliance on businesses by implementing an online platform for the electronic payment of the Employee Provident Fund and introducing administrative measures to ease income tax compliance. On the other hand, the World Bank noted that India lags in areas such as “starting a business”, “enforcing contracts” and “dealing with construction permits”.

New Zealand topped the list, followed by Singapore, Denmark, Korea, Hong Kong, USA a 6th place, UK at 7th, Norway at 8th, Georgia at 9th and Sweden at 10th.

Right at the bottom is Somalia at 190, Eritea at 189, Venezuela at 188, South Sudan at 187 and Yemen at 186. Pakistan is at 147.

Pertaining to India, doing business is easiest in Ludhiana, Hyderabad, and Bhubaneshwar among 17 Indian cities surveyed.

So what are the points considered to arrive at this ranking? It is mainly reforms making it easier to do business and under this there are 10 categories:

1: Starting a business (India ranks 156th)

India made starting a business faster by merging the applications for the Permanent Account Number (PAN) and the Tax Account Number (TAN), and by improving the online application system. This reform applies to both Delhi and Mumbai. Mumbai also made starting a business faster by merging the applications for the value-added tax and the profession tax.

2: Dealing with construction permits (rank is 181)

India made dealing with construction permits less cumbersome by implementing an online system that has streamlined the process at the Municipality of New Delhi and Municipality of Greater Mumbai. The online system has streamlined the process of obtaining a building permit, thereby reducing the number of procedures and time required to obtain a building permit in India.

3: Getting electricity (rank is 29)

4: Registering Property (rank is 154)

5: Getting Credit (rank is 29)

India strengthened access to credit by amending the rules on priority of secured creditors outside reorganization proceedings and by adopting a new law on insolvency that provides a time limit and clear grounds for relief to the automatic stay for secured creditors during reorganization proceedings. This reform applies to both Delhi and Mumbai.

6: Protecting minority investors (rank is 4)

India strengthened minority investor protections by increasing the remedies available in cases of prejudicial transactions between interested parties. This reform applies to both Delhi and Mumbai.

7: Paying taxes (rank is 119)

India made paying taxes easier by making payment of EPF mandatory electronically and introducing a set of administrative measures easing compliance with corporate income tax. This reform applies to both Delhi and Mumbai.

8: Trading across borders (rank is 146)

India reduced import border compliance time in Mumbai by improving infrastructure at the Nhava Sheva Port. Export and import border compliance cost were also reduced in both Delhi and Mumbai by eliminating merchant overtime fees and through the increased use of electronic and mobile platforms.

9: Enforcing contracts (rank is 164)

India made enforcing contracts easier by introducing the National Judicial Data Grid, which makes it possible to generate case measurement reports on local courts. This reform applies to both Delhi and Mumbai.

10: Resolving insolvency (rank is 108)

India made resolving insolvency easier by adopting a new insolvency and bankruptcy code that introduced a reorganization procedure for corporate debtors and facilitated continuation of the debtor’s business during insolvency proceedings. This reform applies to both Delhi and Mumbai.

The distance to frontier (DTF) measure shows the distance of each economy to the “frontier,” which represents the best performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s distance to frontier is re ected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier. India has done very well on this front, going up to 60.76. In terms of DTF, India has done best in terms of paying taxes, followed by getting credit.

Whatever the report says, on the ground, people feel that things have improved but have a long way to go. The attitude of Govt employees where most clearances are given has not changed and ‘greasing the palms’ continues though no one today talks about it.

What is encouraging to see is that the Govt has taken these tenets of the Ease of Doing Business as its benchmark – it is looking minutely at where it has failed and the reasons cited by World Bank and working towards bettering it.

It will take a while to get to the two-digit notch which is where the Govt wants to see India on this index. According to an output-outcome framework document prepared by the government, India wants to reach the 90th rank in 2017-18 and 30th by 2020. And currently, this seems absolutely doable!

More importantly, let us not concentrate only on this Ease of Doing Business index. There are other factors which are equally if not more important – a sense of security, , macroeconomic stability stable exchange rate, labour force talent and skills, and physical infrastructure. Are we working on these, especially labour force talent and skills?

This index does not showcase India’s investment climate or does not in any way indicate growth prospects; it only highlights the red tape. Hope the politicians and Govt officials do not go rah-rah, quick to point fingers and claim victory. This index is NOT THE ULTIMATE MARKER OF REFORM SUCCESS!

For a detailed report on India: http://www.doingbusiness.org/reports/global-reports/~/media/WBG/DoingBusiness/documents/profiles/country/IND.pdf

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