India scales one rank on WB’s ease of doing business index

The Dollar Business Bureau

Despite PM Modi’s continuous efforts to improve India’s business climate, India has climbed just one rank up to the 130th position among 190 countries in the World Bank’s latest Ease of Doing Business Index.

The new ranking has also seen a radical departure from its previous lists, with New Zealand replacing Singapore, while several countries such as Bhutan, Brazil, China, Nepal, Russia and South Africa ranking higher up in the order.

The present Indian government has taken a slew of initiatives over the past two years. It has encouraged digitisation, streamlined electricity capacity, eased insolvency and supported manufacturing through various measures. The results of these initiatives, though, reflected in the World Bank’s latest report as it showed slight improvements in four key indicators: enforcing contracts, getting electricity, registering property and trading across borders.

The global lender underscored that though India has embarked on a fast-paced growth path, which has resulted in substantial improvements in its key economic indicators, the country still needs transformative reforms to bolster its economy,

Referring to the 2014 election and the then several promises made by the policymakers, the report said, “As a result of the election platform-driven reform agenda, over the past two years the 'Doing Business' report has served as an effective tool to design and implement business regulatory reforms," the report said.

The World Bank acknowledged that India has considerably improved on the time and cost to provide electricity to businesses.

"This reform led to the simplification of the commercial electricity connection process in two ways. First, it eliminated the need to purchase and install a distribution transformer and related connection materials, as the connection is now done directly to the distribution network, leading to a reduction in cost," it said.

"Secondly, the time required to conduct external connection works by the utility has been greatly reduced due to the low-tension connection and there is no longer a need to install a distribution transformer."

Due to these calculated measures, now the time taken and cost incurred to connect to electricity has gone down from 138 days in 2013-14 to 45 days in 2015-16 and 846% of per capita income to 187%.

India has also made paying taxes easier by introducing an e-system for paying employee state insurance contributions, while the Customs Electronic Commerce Interchange Gateway portal allowed till April 2016 the e-filing of customs declarations, entry and shipping bills, bringing down the time and cost for export and import documentary compliance, the World Bank said.

The Indian government has also made operational an integrated risk management system to ensure that all the consignments are selected based on the principles of risk management. In May this year, the Indian government enacted the Insolvency and Bankruptcy Code, which, once implemented, will overhaul the 60-year-old framework for company liquidation and introduce new insolvency practices.

"Finally, the government has also acknowledged the need to implement reforms across the country - not just in Mumbai and Delhi, which are the cities covered by Doing Business. Lawmakers have recommended the implementation of a large number of reforms across all states, going beyond the scope of Doing Business," the World Bank said.

The Narendra Modi-led government has always put Ease of Doing Business on the forefront of his domestic and foreign policy. After the announcement came out, several Indian leaders as well as the industry stalwarts expressed their disappointment.

“I am a bit disappointed. Not only the government of India, but every state is so actively engaged and wants to ease the situation... But for whatever reason, it has not been adequately captured in the ranking,” Commerce and Industry Minister Nirmala Sitharaman said on Wednesday.

The newly-announced index also indicates that though the government has been active in making adequate decisions, the implementation of these decisions still remains a major concern. The government now needs to retrospect on its previous policy initiatives and then outline a compelling future strategy and work on the other key indicators.