India moves up in ‘ease of doing business’ ranking

World Bank official lauds efforts of Modi government; 'It took four months in 2005 to start a business in India, but it takes only 29 days now'

India improved its position from last year’s 134 to 130 in the World Bank Doing Business 2016 ranking, which was released on Tuesday.

Last year’s report ranked India at 140, but this year’s report features the recalculated 2015 rankings, in which India comes at 134, computed according to a new methodology. The WB Doing Business reports, started in 2002, review business regulations and their enforcement across 189 countries.

Focus area

Improving India’s ease of doing business ranking has been a focus area of the Narendra Modi government since May 2014, and its efforts came in for praise by Augusto Lopez-Claros, Director of the WB Global Indicators Group, which brings out the report.

“My expectation…is that if this process continues, if it is sustained, and the authorities show the degree of determination which has been in evidence in the last year, then we could see substantial improvements in the coming year,” he said, briefing journalists. India also improved its ‘distance to the frontier,’ a measure of a country’s absolute performance.

“Among South Asian economies, India made the biggest improvement in business regulation, increasing its distance to frontier score by 2 points and moving up in the ease of doing business ranking from 134 to 130. India ranks in the top 10 in Protecting Minority Investors (8), as its law grants minority shareholders strong protection from conflicts of interest and provides extensive rights to shareholders in major corporate governance,” the report said.

The improvement in two indicators, ‘starting a business’ and ‘getting electricity,’ pushed India up the ladder, according to the report. “Now, companies can get connected to the grid and get on with their business, 14 days sooner than before,” the report said, based on the recently simplified procedures in Mumbai and Delhi. The number of days it takes to start a new business has gone up marginally from last year, from 28.4 to 29 this year, but the report has taken note of other measures in the last year that made starting a business easier. The report commended the legislative changes that eliminated the minimum capital requirement and the requirement to obtain a certificate to start business operations.

“Several other initiatives to simplify the start-up process were still ongoing on June 1, 2015, the cut-off date for this year’s data collection,” the report said. “These include developing a single application form for new firms and introducing online registration for tax identification numbers.” Mr. Lopez-Claros said India would need to further reduce the number of days it takes to start a new business. “It is still the case that in India, it takes 29 days to get a business started… It’s a lot less than it used to be, which is good, but it’s certainly quite a bit higher than the global average… There are now 132 countries where it takes less than 20 days to get a business started, India is not one of them… So, we want to move the country in the direction of increasingly being part of this set of high-performing countries,” he said, naming construction permit and enforcement of contracts as two indicators that have scope for improvement in the immediate future. “I think that what I want to emphasise here is not that there are bottlenecks, which, of course, we understand… we see a concerted effort on the part of the government to do something about the business environment,” he said.