Over the last five years India’s ranking on the world Bank’s Ease of Doing Business (EODB) index has remarkably improved from 142 in 2015, to 131 in 2016, to 130 in 2017, to 100 in 2018, to 77 in 2019 and to 63 in 2020. In terms of gains, India climbed up the ladder by 14 steps over the last year; however, it fell short of the aim of achieving 50th rank on the index by 13 ranks. India needs aggressive reforms in select areas over the next one year to figure among the top 50 countries as aimed by PM Modi.
The World Bank EODB index compares the business environment of 190 different economies; and its rankings impact the reputation of the countries while providing guidance to the governments on policy reforms in areas of doing business. The improvement in overall ranking of India is impressive; however, the individual ranking of each factor points to the ground reality of ease of business at which the investor looks at while making investment decision. Therefore, it become imperative for India that progress is made in each factor to be able to project itself as one of the best investment destinations.
The following Table summarizes India’s performance in ten parameters assessed by the World Bank on the Ease of Doing Business Index
Source: World Bank EODB Report, 2020
- India has fared the best in Regulatory Protection of Shareholder’s rights with a rank of 13 albeit lower than 7 of last year. Likewise, India’s ranking on Getting Credit fell to 25 from 22 last year.
- On the positive side, India made substantial progress on Resolving Insolvency owing to the implementation of Insolvency and Bankruptcy Code, which was well captured in the indicator ranking at 52 that moved up from 108 last year. India took several steps to reform the procedures for Construction Permits, consequently resulting in big strides on the 2020 ranking to 27 from 54 last year.
- India has shown incremental progress in the following parameters:
– Getting Electricity (2020 ranking moved up 22 from 24 last year)
– Starting Business (2020 ranking 136 moved marginally from 137 last year)
– Registering Property (2020 ranking upgraded to 154 from 166, indicating limited
– Paying Taxes (2020 ranking moved up to 115 from 121 last year, calling for
continuation of procedural reforms using technology)
– Trading Across Borders (2020 ranking improved to 63 from 80 last year, pointing to
India’s efforts aligned to Trade Facilitation Agreement (TFA) to streamline custom
procedures at ports to cut clearance time)
- Areas where India’s performance remained lackluster include Enforcing Contracts, Starting Business and Registering Property. The rankings for India in these areas remained almost unchanged, indicating no substantive reforms in these areas were undertaken by the Government of India during the last year.
- Sanctity of Contracts
Unambiguous and predictable legislative rules supported by an efficient judiciary that preserves sanctity of contracts is a prerequisite for successful commercial transactions. However, this aspect of doing business in India remains a major challenge— on the ease of doing business ranking, India ranks at 163 out of 190 countries when assessed for sanctity of contracts, much lower than that of China (5), Thailand (37), Viet Nam (68) and even Indonesia (139). While it takes 496 days in China, 400 days in Vietnam and 420 days in Thailand to enforce a contract through the courts in case of a dispute, in India it, alarmingly, takes almost 4 years (at par with Bangladesh, which ranks lowest among the South Asian economies). Delays in arbitration and litigation upon a breach of contract often lead to economic losses, increased legal costs, and lesser revenues, eventually resulting in reduced investments. Therefore, the Central Government and the Courts should be coordinated to ensure that contracts are enforced and honored.
- Starting A Business
The 2020 EODB ranks India at 136 assessing on Starting a Business; arcane procedures and high cost of getting a business started are proving detrimental to business conduciveness. The number of procedures in starting a business in India is 10 that take 18 days to open a business. Considerable number of days in getting started costs money to businesses. In comparison, Viet Nam’s 8 procedures take 16 days.
- Registration of Property
It takes 9 days to register a property in China and Thailand. In India it takes 58 days to get a property registered while in Viet Nam, it takes 53 days. Indonesia has fared better than India and Vietnam on this factor where it takes only 31 days to register a property in six simple steps. India needs to continue reforms in the area to cut down time taken to register property.