At the heart of EoDB reforms in India has been an extensive focus on rationalisation and digitalisation of regulatory compliances, encompassing the entire business cycle from start to exit.
Recently, a senior industry leader shared his first-hand experience of improved Ease of Doing Business (EoDB) in the country, mentioning how the allocation letter for a designated frequency band was issued within a few hours by the Department of Telecommunications. Several industry members agreed with him, and social media was full of laudatory messages appreciating the increasingly facilitative investment climate in India.
There is no doubt that the business environment in the country in general is improving rapidly, thanks to the sustained efforts of the government which has prioritised this since 2014. As a testimony to this, India’s Doing Business ranking, as per the latest World Bank Report, improved from a position of 142 in 2015 to 63 (out of 190 economies) in 2020. The country has continued to maintain its march to improvement, which is evident from its 6-position improvement to 37th rank (out of the 63-nation list) in 2022 on the annual World Competitiveness Index of Institute of Management Development (IMD).
At the heart of EoDB reforms in India has been an extensive focus on rationalisation and digitalisation of regulatory compliances, encompassing the entire business cycle from start to exit. Rationalisation of regulatory compliances received the topmost priority when a study in 2020 suggested that businesses in the country have to navigate over 69,000 regulatory compliances, of which 63% pertained to states, whereas the remaining were with the Central government. After 2 years, more than 33,000 compliances have been simplified, rationalised, digitised or decriminalised by Central ministries/departments and states/union territories, as per the Government’s statement in Parliament. Efforts are on to sustain the exercise of rationalisation of the compliances.
Targeting to make ‘Starting a Business’ easier, where India stood at the 136th position in the global ranking, The Department for Promotion of Industry and Internal Trade (DPIIT) in September 2021 launched the game changing National Single Window System (NSWS). NSWS seeks to provide all business approvals/clearances electronically, cutting across Central ministries/state governments in a time-bound and hassle-free manner.
Trade facilitation has also seen a flurry of reforms recently, where India’s global ranking jumped up from 146th position in 2018 to 68th position in 2020. Initiatives such as the shift towards paperless compliance system, greater clearances through Risk Management System, etc. have helped lower dwell-time and transaction costs for exporters and importers. We must sustain the pace of reforms for continued digitisation and ensure speedy clearances of cargo. Introducing uniformity of customs procedures across geographical locations and enhancing the effectiveness of grievance redressal mechanisms are also important.
With a view to ease the process of enforcing contracts, where India ranked at a low 163rd position in 2020, a range of reform measures are being introduced. This includes establishment of dedicated Commercial Courts, automatic and random allocation of cases, launching of Electronic Case Management Tools, and renewed emphasis on Alternative Dispute Resolution mechanisms. As a result, the disposal time for commercial cases has reduced in the last 2 years by almost 50% to 626 days and the time taken for filing of cases and serving of summons has also come down to 15 days from 45 days, as per the website of the Ministry of Law and Justice. In parallel, the scope for litigation is being reduced by decriminalising business laws involving non-serious offenses. A long journey is still to be covered before India’s enforcing contracts mechanism could be compared with the best in the world.
Easing the process of exit, the government in 2016 introduced the Insolvency and Bankruptcy Code (IBC), allowing failed firms to exit painlessly either through quick liquidation or business restoration when viable. As a result, average time to resolve insolvency has declined from 4.3 to 1.6 years between 2017 and 2020.
Rigorous reform measures introduced by states/UTs as part of DPIIT’s Business Reform Action Plan (BRAP) since 2014—entailing their annual assessment and rankings—have also been contributing to sustained improvement in the business environment at a pan-India level. States/UTs are working aggressively in the direction of rationalising and digitising compliances, eliminating the need for physical submission of documents, ensuring time-bound approvals, promoting joint inspections, and encouraging self/third-party certification, etc. As most of the EoDB issues pertain to states, continued focus on BRAP is important to make it a success for effective implementation of reforms.
Going forward, new areas of reforms must be identified on a regular basis, which should essentially revolve around developing an effective Single Window System for all regulatory approvals and renewals with provisions of time-bound clearances or deemed approvals, self/third-party certification for all possible areas, and stringent deterrent action for non-compliances of rules and regulations. Focus would also have to be accorded to effective delivery of benefits to the industry. The significant improvement in EoDB will certainly go a long way to improve the global competitiveness of the Indian industry and further expand our chances of attracting foreign investment.
The article first appeared in The New Indian Express, 7 September 2022.