Beating the Rhetoric
Every year the World Bank releases ‘Ease of Doing Business Report’ after studying the regulatory environment in a country to set up and run a business. It evaluates 190 countries every year and comes out with rankings. In its report released last month India has increased its rankings by 37 places from 137 in 2016 it has climbed to 100 in the latest rankings. This jump is indeed laudable when seen in the context of global economic slowdown.
So before we sit down to analyse the rankings let us look at the report itself and how it is constructed by the World Bank. The ease of doing business rankings are based on a country’s performance on ten different parameters. These include enforcing contracts, starting a business, paying taxes, resolving insolvency among others. In India, these rankings are based on the business environment in Mumbai and Delhi. A lower rank indicates better performance on that parameter, whereas a higher rank indicates worse performance on the indicator. India’s ranking improved in most of the ten parameters over the previous year.
An important point that needs to be emphasized at this point is that in India these parameters are regulated by different agencies across the three tiers of government i.e. central, state and municipal. For example, for starting a business, registration and other clearances are granted by central ministries such as Finance and Corporate Affairs. Electricity and water connections for a business are granted by the state electricity and water boards. The municipal corporations grant building permits and various other no objection certificates to businesses. So in order to achieve better rankings means robust improvement in working across all levels of governance.
For India, the jump by a respectable thirty places can be attributed to a number of structural changes that have happened in the past one year. Starting a business has become relatively easier in India. With the introduction of Companies Act 2013 and rapid use of IT services by government departments to issue PAN as well as TAN numbers have resulted in the further easing of time and efforts taken towards the starting of a company. There has been a remarkable increase in the ease of paying taxes. The rules and regulations towards payment of corporate taxes, deduction of provident funds, and deduction of TDS/TCS have become relatively easier.
The recently implemented Banking and Insolvency Code is a pathbreaking step towards corporate governance. Till the implementation of this bill the issue of insolvency was not being addressed in India in a structured manner. If a company failed the rules were not clear on how the assets of the company would be classfied and distributed. The recently implemented code brings in a new paradigm. The bill clearly states how an asset of a company that has declared insolvency is to be treated. It also sets up special legal mechanism to address the question of insolvency in a time bound manner.
The export import complaince in ports have reduced and the system has become much more efficient. The easing of norms has also resulted in remarkable improvements in trade compliance as well as export import issues. Enforcing contracts has also become easier due to the establishment of the National Judicial Data Grid through comprehensive legislative managment.
India has achieved remarkable progress in the past two years. Yet the road ahead is more daunting and difficult. To further improve its business image India must work towards easing land clearances, acquiring land and property and further easing of other regulations. Yet despite the challenges of the road ahead, India will undoubtedly be able to further improve its rankings.
(Views expressed by the author are personal)