India does it yet again! Among Top-10 Improvers for second consecutive year

On 31st October 2018, the World Bank (WB) declared its annual ranking of Ease of Doing Business (EoDB) for the year 2019. This ranking is based on the data collected until June 2018 through its extensive network and the methodology is elaborated in detail in the Bank’s 311 page report.

Having improved the Ease of Doing Business ranking from 130 to 100 last year, India again jumped 23 ranks in the current year’s ranking to the place 77. An improvement of 53 ranks within two years’ span is a spectacular achievement.

When Modi Government came in power four years ago, it announced the dream of taking India from 2014’s 142nd rank to Top-50 in a few years. It sounded like an overly ambitious plan at best, and a hollow promise at worst. But the country has already moved up 65 notches since then with bold reforms and concerted efforts.

The ranking is done based on 10 criteria. Over the last one year the ranking improved on the following counts.

1.     Starting a business: Ranking improved by 19 (from 156 to 137). WB traced it mainly to the tax reforms. GST replacing over a dozen indirect taxes requiring separate registrations.

2.     Dealing with Construction permits: Ranking improved by 129 (from 182 to 52). This came mainly on the back of streamlining of construction permits and making it faster and less expensive to obtain them.

3.     Getting electricity: Ranking improved by 5 (from 29 to 24).

4.     Getting Credit: Ranking improved by 7 (from 29 to 22). Mainly traceable to the amendments in insolvency law giving absolute priority to the secured creditors within the insolvency proceedings.

5.     Trading across borders: Ranking improved by 66 (from 146 to 80). WB states “India reduced the time and cost to export and import through various initiatives, including the implementation of electronic sealing of containers, the upgrading of port infrastructure and allowing electronic submission of supporting documents with digital signatures."

6.     Enforcing contracts: Ranking improved by 1 (from 164 to 163).

Under certain criteria, the ranking somewhat deteriorated.

1.     Registering property: Deteriorated by 12 (from 154 to 166)

2.     Protecting minority shareholders: Deteriorated by 3 (from 4 to 7), yet remains among top 10.

3.     Paying Taxes: Deteriorated by 2 (from 119 to 121), in spite of introduction of GST.

4.     Resolving insolvency: Deteriorated by 5 (from 103 to 108) despite a progressive Insolvency law.

The ranking is subjective also to the improvements done by the other countries.

The EoDB Study has its own limitations. It’s critics point out towards inclusion/exclusion of certain criteria and the weightage given. Others say it does not focus on poverty. In India, some object that it covers only Mumbai and Delhi – similar to other countries – where the study covers only one or a few cities.

Firstly, the study consistently covers Mumbai and Delhi. Hence it compared apples to apples. Interestingly, in a ranking of states within India, Maharashtra (whose capital is Mumbai) ranks 13th and Delhi 23rd. Will a wider regional inclusion give a better ranking for the country? Just a thought.

Secondly, it is not a study in poverty alleviation. It’s a benchmark study in regulations. It shows if the de-regulation and reforms are making doing-business easier or more difficult in a country. And how is the country faring in relation to the other countries.

Rather than absolute ranking – the trend is decisive. It is an important indicator for capital and infrastructural investments in the country, and looked at with great interest by the investors.

While India should be satisfied about the leap forward, a lot needs to be done in the coming years. 137th rank among 190 countries in ease of starting a business is certainly not comforting to foreign direct investors!

(Thanks to World Bank, Wikipedia, ToI)