Home Editor's picks The criticism of India's meteoric rise in Ease of Doing Business Rankings stems from ignorance

The criticism of India’s meteoric rise in Ease of Doing Business Rankings stems from ignorance

The Government is working with the World Bank to recognise over 200 reforms that will help propel India into the top-50 bracket in ease of doing business, according to the Department of Industrial Policy and Promotion (DIPP). 

The government works as a monolith, and unfortunately, several times, the various cogs and process behind delivering a said output is unknown. With respect to India’s meteoric rise in the Ease of Doing Business rankings, much has been said and the negative perception has manifested itself from several quarters. A friend of mine too called and asserted, rather vehemently that the entire exercise was ‘fixed’.

I was never much of a reader but my fascination with Amar Chitra Katha made me a great story listener and a dramatic storyteller. Amar Chitra Katha simplified the most complex stories in history – Mahabharata and Ramayana and made it simple enough even for toddlers to understand. If Mahabharata and Ramayana can be simplified, shouldn’t complex Government DPRs and public policies are made easy enough for the public to understand?

Intelligence is not about wordplay, vocabulary or complex philosophies. Intelligence is about taking the most complex ideas and communicating it to the lowest possible denominator. Consultants make their millions like that. Centralized communication is always a challenge.

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While several other schemes and achievements, the process of which needs to be explained, in this article, the attempt is to simplify Governments’ complex ideas as far as Ease of Doing Business is concerned.

About Ease of Doing Business

The Ease of Doing Business project provides objective measures of business regulations, important dimensions of the regulatory environment and their enforcement across 190 economies and selected cities at the subnational and regional level. It provides quantitative indicators on different parameters which define the ease of doing business in a country.  It also measures features of labour market regulations. Although it does not present rankings on the labour market regulation indicators, it does present the data for these indicators.

Approach and Methodology

World Bank ranks various countries on Ease of Doing Business Parameters using two techniques:

  1. Scoring based on 11 indicators
  2. Perception Survey feedback received from the beneficiaries.

Ease of Doing Business captures several important dimensions of the regulatory environment affecting domestic firms. It provides quantitative indicators on regulation for 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 highlighted in the table below. Ease of Doing Business also measures features of labour market regulation which are reported as a separate section and not included in the ranking.

Table of EODB indicators and what is measured

The next critical component is the perception survey wherein World Bank understands the actual implementation of reforms on the ground and its overall impact on the business regulatory environment of the country. The data is collected through several rounds of communication with expert respondents (both private sector practitioners and Government officials), through responses to questionnaires, conference calls, written correspondence and visits by the team. The entire process of feedback mechanism is reflected in the pictorial diagram below:

Process of feedback mechanism

The above diagram depicts the timeline of EODB report launch, beginning with Questionnaire development followed by Data Collection & Analysis and, Data verification, until the final step of publishing the report.

Ease of Doing Business: India’s Journey

In a major boost to the Government, India has jumped 23 spots in the new World Bank Ease of Doing Business (EODB) 2019 rankings to take up the 77th spot, with a score of 67.23. The report goes on to list India as one of the top 10 major reformers or ‘improvers’ among 190 countries, along with neighbours China. The top spots were occupied by New Zealand (86.59), Singapore (85.24), and Denmark (84.64).

The country’s performance in the last four years in terms of easing business regulations has been impressive: it managed to jump 65 spots during the period. Stakeholders, especially those from the muddled real estate sector, explained that it is now a lot easier to get construction and licensing permits, trading across borders and other Government approvals.

India, too, introduced many reforms such as the Goods and Services Tax to reduce the burden of cascading taxes, amendments to Insolvency and Bankruptcy Code (IBC) for faster resolutions, easier licensing and trading norms.

These are some of the key reasons behind India’s jump from the 142nd spot in 2014 to 77 in the Ease of Doing Business 2019 rankings. While 2017’s 30-rank jump remains, the highest improvement recorded by India, this year’s jump has also been lauded by experts.

Citizens will be pleased to know that India is now among the top 8 South Asian countries in the list. India’s ranking improved based on the relaxation of norms in the construction sector, reduction of taxes, and relaxation in financial markets among other measures.

Ease of Doing Business: India Success Story

The diagram below depicts the timeline of India’s performance in EODB. Against initial target set of reaching top 50 in the World in EODB rankings, India jumped 30 ranks in 2017, followed by 23 ranks in 2018.

India’s success story

India’s performance in Ease of Doing Business Report

Diagram depicts India’s Year-On-Year ranking in EODB rankings.

As one can see, the diagram clearly indicates the plateau of ranking from 132 in 2011 under the Congress regime, to 130 in 2016 under the Modi government, followed by a sharp rise to 100th rank in 2017.

In 2018, India’s rank is 77th in the World.

Rise in EODB ranks since 2011

 

Highlights of Ease of Doing Business 2018

The EODB ranking has given India a considerable edge in 2018. India bagged several accolades like best performance since inception of doing business report, best improver in the world in terms of improvement in rank. India also became the only country in South Asia and BRICS to feature amongst most improved nations.

The following diagram highlights India’s key achievements in EODB rankings. Besides being the biggest improver and holding the record for highest jump in rank, India is the only country amongst South Asia and BRICS economies to feature in most improved nations.

Highlights of EODB

Highlights of Ease of Doing Business 2019

The following diagram of India’s performance in the last two years. India is now ranked 1st among South Asian countries, due to inching closer to international best practices on 8 indications.

Highlights of EODB

India’s performance over the last two years

India’s performance can be credited to positive changes in construction permits, trading across borders, paying taxes, resolving insolvency, enforcing contracts etc. There are several indicators in which India has improved remarkably well.

How India improved in some indicators

Major reforms recognized by World Bank

Under the Modi government, 20 reforms have occurred since 2014, 14 in the last two years and 6 in last year alone.

India’s reforms chart

Way Forward: India’s Quest to Come in Top 50

The Government now needs to keep the reform momentum going. In the area of taxation, indirect tax reform has to be taken to the next level by bringing in the excluded items, including petroleum products, in the GST ambit. On the direct tax side, a new Direct Taxes Code must ensure that the income tax burden on the companies comes down along with the simplification of the tax structure. We still have a huge scope for improvement in Contract enforcement and starting a new business arena – improvements in these will improve the ranking further.

The MSME industry needs more money to invest and easy credit availability. These also will play a critical role in improving the country’s rankings in ease of doing business. The move to take these ranking to State level and extending this to District level is a great initiative.

The Government is working with the World Bank to recognise over 200 reforms that will help propel India into the top-50 bracket in ease of doing business, according to the Department of Industrial Policy and Promotion (DIPP).

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