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Monday, 06 Apr 2015
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Ease of Doing Business in India - So far, so good

 

The Modi government has set a goal to take India to the top 50 in the World Bank rankings on the ease of doing business. The government is fairly determined, and over the last few months, has introduced several initiatives to ease the process and attract increased investments to India.

 

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As per the latest edition of World Bank's Doing Business report, India’s rank has slipped to 142 from 140 in 2014. The ease of doing business index is created by the World Bank Group, wherein economies are ranked from 1–189 based on regulations directly affecting businesses. A high ease of doing business ranking means the regulatory environment in the country is more conducive to starting and operating a local firm. The ranking is based on 10 sub indices like starting a business, getting electricity etc.

 

While working towards improving India’s ranking, the government has taken several initiatives to remove the existing bottlenecks.

 

Topics India’s 2015 Rank India’s 2014 Rank
Starting a Business 158 156
Dealing with Construction Permits 184 183
Getting Electricity   137 134
Registering Property 121 115
Getting Credit 36 30
Protecting Minority Investors 7 21
Paying Taxes 156 154
Trading Across Borders   126 122
Enforcing Contracts   186 186
Resolving Insolvency 137 135

The central government has decided to rank states on the basis of ‘ease of doing business.’ The system is expected to generate competition among the states and also help investors to choose the place to invest. The Department of Industrial Policy and Promotion (DIPP) has circulated 98 ‘action points’ to state governments on ‘creating an enabling framework for stimulating investments in manufacturing with specific timelines for each action.’ The ranking, to be done with the help of a consultative agency, is expected to be in place by June 2015.

 

 

The Union Budget 2015 also announced steps towards ease of doing business in India. The budget proposed to introduce a regulatory reform law that will bring about a cogency of approach across various sectors of infrastructure. This will help infrastructure companies that have multiple businesses like ports, power, roads and airports.

 

The budget further simplified the procedures for Indian corporates to attract foreign investments. It has done away with the distinction between different types of foreign investments, especially Foreign Institutional Investor (FII) that comes under portfolio investments, and Foreign Direct Investment (FDI).

 

Among the states, the Andhra Pradesh government has inked an MoU with the National University of Singapore (NUS) and Confederation of Indian Industry (CII) to work on 'Ease of Doing Business' in the state.

 

As a part of ease of doing business initiative under the Make-in-Maharashtra campaign, Maharashtra Chief minister, Devendra Fadnavis, has also tabled a bill to amend the Maharashtra Municipal Corporation (MMC) Act to this effect. This means industries seeking expansion or new initiative in the Maharashtra Industries Development Corporation (MIDC) areas will not have to take permission from the local body or municipality in that district or town.

 

Madhya Pradesh Chief minister, Shivraj Singh Chouhan, has claimed that the state will be made number one in ease of doing business. Rules, laws and processes in the state will be simplified to boost industry and business, while unnecessary permissions will be abolished.

 

At the central government level, India has also reduced the number of mandatory documents required for import and export of goods to three in each case. The move will lead to reduction in transaction cost and time. Presently, around 10 documents are needed to fulfil the official obligations.

 

Other initiatives include digitising the process of applying for industrial licences and entrepreneurial memorandum and setting up an e-biz platform that seeks to integrate 14 services and make them available online.

 

The recently unveiled Foreign Trade Policy also included ease of doing business as a key focus areas.

 

The slow pickup reported in investors’ perception and outputs in the manufacturing sector points to the fact that the government is moving in the right direction. However, it may be a while before India breaks into the top 50 league.

 

Quote of the week:

  Arun-Jaitley
"The roadmap for us is very clear. We need a lot of investment in India and we need to ease the process of doing business in India and therefore slowly we are introducing changes in that direction,"
- Arun Jaitley, Union Minister of Finance
 

 

 
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