01

For businesses, this year’s Diwali brings in more joy and festivities for India. India has improved its ranking in the ‘Ease of Doing Business’ index at a time when its economy is in slowdown.

According to the World Bank’s ‘Doing Business 2020’ report, India moved from the seventy seventh position to the sixty third position this year. Last year, India jumped 23 places to reach the seventy seventh position. Many are of the opinion that this development will re-assert the reform credentials of the government and attract more investors to the country. India might emerge as a favoured destination for foreign capital in the backdrop of an ensuing trade war between China and the US.

India’s significant improvement

India’s ranking has been driven by significant improvements in seven out of 10 factors on which the ease of doing business is measured. The biggest jump for India lies in the ‘resolving insolvency’ category as it leapt from the hundred and eighth position to the fifty second position after the implementation of the Insolvency and Bankruptcy Code. Its ranking also improved substantially in ‘dealing with construction permits’, a category where it moved from the fifty second position to the twenty seventh position and in the ‘trading across borders’ category where it moved up from the eightieth position to the sixty eighth position.

Prime Minister Narendra Modi had fixed a target of India being among the top 50 countries in the ease of doing business category by 2020. The report stated that India along with other top improvers implemented a total of 59 regulatory reforms which accounts for one-fifth of the total reforms recorded worldwide.

The latest World Bank report stated, “Among other improvements, India made the process of obtaining a building permit more efficient. Obtaining all permits and authorisations to build a warehouse now costs 4% of the warehouse value, down from 5.7% of the previous year. Importing and exporting also became easier for companies with the creation of a single electronic platform for trade stakeholders, upgrades to port infrastructure and improvements to electronic submission of documents.”

Finance Minister Nirmala Sitharaman said to the media, “I am extremely happy that this kind of an upward movement has happened. But of course, we have to touch 50 as has been our target. So, all efforts from this year will be in moving in that direction.”

A twist in the tale

Saikat Sinha Roy, Professor, Department of Economics, Jadavpur University, told BE, “I don’t think that this (ease of doing business ranking) will have any impact on the small and medium-sized businesses. India is a place where there is a lack of investments, both from domestic and foreign entrepreneurs. Earlier, the excuse for the lack of big investors in India was that there was no ease of doing business. That is why there have been several significant reforms in the last few years, one of them being the GST. There are other reforms as well which has helped to improve India’s ranking in this particular category. Even last year there was a significant jump in the index but there was a negligible rise in investment. If the ranking guaranteed investments, then there should have been a considerable amount of investment in the last one year and the Indian economy would not have slowed down.”

Investments are facilitated by other factors. Sinha Roy suggested, “One of the various factors is trade facilitation and there should be ease of transaction cost. If we look at it, India’s ranking in ‘starting a new business’ is pretty low.” India lies in the one hundred and thirty seventh position in ‘starting a new business’. India still lags in areas such as enforcing contracts and registering property.

Paramita Gayen, co-owner, Travelistan, a café in Kolkata, told BE, “India may have improved its ranking in the ‘ease of doing business’ index but I have not experienced any such improvements. The market is down in general. I have pretty good reviews for my café and so the lack of customers is because of the lack of purchasing power.”