India’s Ease of Dong Business (EODB) rank recorded a huge jump by 30 points as per the Doing Business 2018 report published by World Bank on 31st October, 2017. India is now among top 100 economies among 190 economies, a massive improvement from its rank of 130 in 2017. India also stands out as one of the top 10 most improved economies in the areas of doing business this year.
In an interaction to celebrate this result organised by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, on 4 November, Hon’ble Prime Minister Narendra Modi said that ‘ease of doing business’ is akin to ‘ease of living life’ and provides many benefits for the common citizen. Ms Kristalina Georgieva, CEO, World Bank, noted that it is rare for a country to achieve such a jump in rankings in a single year, and even more so for an economy of India’s size and complexity.
This year’s sharp improvement in the rankings is a result of aggressive and transformational reforms undertaken by the Indian Government since World Bank’s last assessment in 2017. Several reform initiatives such as the enactment and implementation of insolvency and bankruptcy law, digitization of compliances and approval processes, simplification procedures, repealing of about 1,200 obsolete acts etc. both at state and central level have contributed to the huge improvement in rankings.
The World Bank measures economies on ten parameters such as starting a business, paying taxes, transacting across borders and obtaining construction permits etc. The rankings are determined by calculating the “Distance to Frontier” score on 10 areas, each consisting of several indicators and by assigning equal weight to each topic.
The Distance to Frontier (DTF) score, measures the absolute level of regulatory performance of the country over time (Figure 1). A higher DTF score over the previous year indicates that the country’s regulatory performance is improving.
Note: The distance to frontier score measures 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. One can both see the gap between a particular economy’s performance and the best performance at any point in time and assess the absolute change in the economy’s regulatory environment over time as measured by Doing Business. An economy’s distance to frontier is reflected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier.
Source: The World Bank
*2014-18 data as per 2017-18 methodology
*2010-2013 data as per 2017 World Bank Doing Business Figures
India’s DTF score has significantly improved over the decade, with the score going up to 60.77 in the most recent survey from 56.05 in 2017 and 48.77 in 2010. India’s DTF score registered a record increase by 4.71 points this year. India joined the club of top 10 most improved economies.
Notably, India’s overall DTF score has improved in all areas (Table 1), except ‘registering property’. India achieved high DTF scores in the areas of paying taxes, resolving insolvency and protecting minority investors which also pushed up India’s EoDB rankings in these areas.
In relative terms i.e. when India’s success in the ease of doing business is measured compared to the world, out of 10 indicators, India improved its rank in 6 areas – dealing with construction permits, getting credit, resolving insolvency, enforcing contracts, paying taxes and protecting minority investors.
Table 1: Change in EoDB Rankings and DTF scores between 2017-18
Source: World Bank
The most significant achievement is in ‘protecting minority investors’, where India secured a rank of 4, emerging as a global exemplar. India also shot up in ‘paying taxes’ and ‘resolving insolvency’, moving up by 53 points and 33 points respectively.
India’s jump in the EoDB rankings is a notable achievement on multiple accounts and the Government’s central role in bringing about this success is commendable. State governments too have taken up this mission, and are working hard to deliver best results on the Business Reform Action Plan initiated by DIPP.
CII Initiatives and Recommendations
CII works closely with the Department of Industrial Policy and Promotion (DIPP) on matters relating to EODB. Last year, CII had taken several initiatives both at the central and state levels and provided a number of recommendations which have been seriously considered by DIPP as well as the state governments.
CII’s Task Force on Ease of Doing Business has been pro-actively working to improve the overall business environment in India. CII’s inputs and initiatives on various reforms encapsulate a broad range of areas including implementation of GST, launch of Customs Electronic Commerce Interchange Gateway portal which simplifies border and documentary compliance procedures, setting up of e-courts to expedite electronic filing of complaints, and Single Window System for granting all approvals and clearances related to Central, State and Local Governments at one office, among others.
In 2016, CII conducted a detailed study on ‘Improving Ease of Doing Business’ in 8 states: Andhra Pradesh, Haryana, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Rajasthan and West Bengal. Some CII recommendations to these states include – boosting the efficiency of single window system, increasing the efficiency of land banks, conducting labour inspections, etc.
CII is also actively working with the Governments of Maharashtra, Jharkhand and West Bengal for the effective implementation of various reforms as well as identifying new areas of reforms. CII recommendations in these areas include appropriate training for government officials regarding online documentation, digitization of land records, setting up of a dedicated body or bureau as a one-stop system for State level regulatory and fiscal incentive approvals, establishing an e-payment gateway and industry specific fee calculator etc.
CII conducted a detailed study on trading across borders against the backdrop of WTO’s multilateral Trade Facilitation Agreement (TFA). This involved rigorous engagement with various stakeholders of the trading ecosystem including exporters, importers, Customs House Agents (CHA), Container Freight Stations (CFS), Port Officials and Customs officials to understand issues and make recommendations. Several conferences were held in 2017 in New Delhi, Chennai and Mumbai for spreading awareness and inviting feedback from stakeholders.
The report noted the substantial improvements taking place on a continuous basis for simplification, rationalisation and fast-tracking procedures at the borders. Some of CII’s key recommendations on this agenda include regulating the discretionary powers of custom officials, need for a strong regulator for shipping lines and removal of practices like charging nomination fees and facilitation fees, reducing the time and charges on account of Container Freight Stations and online publications of test results and NOC’s by the Participating Government Agencies.
CII also submitted a comprehensive representation on creating inter-linkages between Government databases for exports and imports to DIPP with a view to digitise the interlinking of databases. Some of the major benefits of this process are greater accuracy and speed of cross-verification of data to detect non-compliance, easier monitoring of deviations from the norm, automatic retrieval of past data and information, elimination of repetitive data submission etc.
India’s new rank provides much comfort to industry that the Government is dedicated to facilitating processes and easing the investment climate. It has perceptibly shifted investor confidence upward and inspired new business sentiments. Given that several reforms such as GST and bank recapitalisation have come after the World Bank cut-off dates, next year’s position is bound to further escalate.
With the commitment of the Central and state governments to further reforms, India is swiftly heading towards meeting Prime Minister Modi’s vision of achieving rank 50 in the World Bank Doing Business report. CII looks forward to working with the government on this critical area in days to come.