Ease of doing business ranking: India breaks into top 100 for first time; all you need to know
The two disruptive steps taken by the Narendra Modi government - GST and demonetisation - and their impacts have not been considered by the World Bank while rating India in its ease of doing business report
The World Bank’s survey report ‘Doing business 2018’ released on Tuesday has brought cheer to the Narendra Modi government as it has proved that doing business in India is much easier now than before, endorsing the economic policies that the incumbent government has initiated since 2014.
According to the report, India for the first time has moved into the top 100 in the World Bank’s ‘Ease of Doing Business’ (EODB) global rankings from last year’s 130.
This is a positive report for a government fighting economic slowdown and incessant attacks from the Opposition and senior BJP leaders on the negative impacts the demonetisation and a hasty rollout of GST.
Other goodies for India in the report include its status as one of the top 10 improvers in this year’s assessment as it implemented 8 out of 10 reforms in ‘Doing business’ indicators.
Among 10 indicators on which reforms were implemented in Delhi and Mumbai (the two cities were covered by the report), India has improved over last year on eight indicators — like in the areas of protecting minority investors, getting credit and getting electricity.
The ten indicators are starting a business; dealing with construction permits; getting credit; registration of property; getting electricity; protecting minority investors; paying taxes; trading across borders; enforcing contracts and resolving insolvency.
Other key achievements
• In one of the key indicators ‘Distance to Frontier Metric’—India’s score has gone up from 56.05 in Doing business in 2017 to 60.76 in Doing business in 2018.
• India has adopted 37 reforms since 2003. Half of these reforms have been implemented in last four years.
• In past 15 years, India, with 37 reforms, carried out the highest number of reforms, followed by Sri Lanka (22) and Pakistan (19).
• Bhutan (75) is the highest ranked economy in South Asia, followed by India (100), Nepal (105) and Sri Lanka (111). Afghanistan (183) and Bangladesh (177) are the lowest ranked economies. Pakistan’s ranking is 147.
• India ranked 4th in global ranking on Protecting minority investors.
• India made paying taxes easier — ranked from172 in 2017 to 119 in 2018.
• Resolving insolvency: Improved (from 136 to 103) due adoption of new insolvency and bankruptcy code.
GST, note ban not considered, says World Bank
World Bank vice president (South Asia region), Annette Dixon said, “India has embarked on a strong reform agenda to improve its business environment. The significant jump this year is a result of the Indian government’s consistent efforts, over the past few years. It’s more than three years’ efforts of India. Due to the number of reforms undertaken by the government, India’s ranking has gone up.”
“There have been implementation efforts not only at the Centre level but also at state levels, and strong coordination between the ministries. As India focuses on growth model, it needs to do consistent reforms like in the areas of competitiveness, soundness of financial sector, etc,” she said.
The report didn’t consider Goods and Services Tax (GST) and Demonetisation in its survey. “GST was a complicated reform to have rolled out. Steps taken by the government this year, may take 2 to 3 years to show results. This year it was too late for us and it will be considered next year or thereafter. Demonetisation wasn’t measured in this index,” added Annette Dixon.
Breaking into top 50 doable, says FM
Visibly upbeat by the World Bank’s report, Finance Minister Arun Jaitley in a press conference, after the release of the report, said, “In the very first year of the government, Prime Minister Narendra Modi said that our target should be to take India amongst the first 50. It’s doable and can be achieved. World Bank report clearly shows India is reaching a grand league.”
“The biggest jump has been in ‘Paying taxes’ indicator as last year among 189 countries, India ranked 172. This year it’s 53 notches better and ranked at119. This has been due to a system of electronically paying taxes, filing, assessment and making the system easier. Starting a business is one area where lot of work is in progress. If your business plan is ready, no license is needed except in rarest cases, you can get your firm’s name registered online on a single day. In the next few months, the impact of this work can be felt on ground,” the FM said.
On the country underperforming in the areas of registration of properties and enforcing contracts, Jaitley said, “Though a lot has been done on registration of properties by going online, we’ve asked state governments to expedite the process at municipal corporation level. There is lot of scope in improving enforcement of contracts.”
CII, SJM hail; SMEs say report not a panacea
The Indian industry has hailed the report. “The huge improvement in ranking and score will immediately boost investor sentiment and it validates the commitment of the government to fast-tracking economic reforms, addressing red tape and facilitating business, which it has undertaken in mission mode over the last three years,” said CII director general, Chandrajit Banerjee.
FICCI president, Pankaj Patel added, “An improvement by 30 places in the rankings is significant and will enhance India’s attraction as an investment destination and give a further boost to ‘Make in India’.”
While welcoming the report, Ashwani Mahajan, co-convener of the RSS affiliate Swadeshi Jagran Manch, said, “Unlike during the UPA regime where there was policy paralysis, the present government has shown political will by minutely working on key parameters. However, compliance problem exists in small scale sector. Getting FDI, that makes a miniscule contribution to our investment, is fine, but the need is to have EODB for domestic investors and local entrepreneurs, especially in the MSME sector. India should come up with its own EODB ranking based on local parameters, rather than global indicators.”
The World Bank has said the SME sector in India has been growing larger and is important in job creation.
“FM’s announcement that focus will be on making construction permit online is welcome. However, the report is indicative only and excludes many issues like labour laws, corruption, competition policies, trade policies etc. It can’t be viewed as panacea for all problems,” said Anil Bhardwaj, secretary general, Federation of Indian Micro and Small & Medium Enterprises.
Congress dismisses report
Reacting sharply, the Opposition Congress said, “PM’s policy adventurism coupled with the adhocism of his FM to deliver has caused widespread economic misery and distress.”
“India’s GDP growth rate has fallen for six straight quarters. The economy is, therefore, not growing at 7.5 per cent as claimed again and again by the FM. Over 3.72 crore jobs have been lost on account of demonetisation in MSME sector. As many as 680 Start Ups have shut down in the past two years. Share of exports in GDP has fallen to a 14-year low. EODB rankings do not take into account the utterly flawed implementation of the GST. Do all these indicate robust EODB?” questioned Randeep Singh Surjewala, Congress leader who is in charge of communications for the party.
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