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What is Ease of Doing Business Index?

  • Ease of Doing Business Index is made by the World Bank Group which is based on the study of laws and regulations.
  • It takes input and verification from more than 9600 government officials, accountants, lawyers and business consultants in 185 economies.
  • Ease of Doing Business Index is meant to measure regulations directly affecting businesses.
  • A nation’s ranking on the Ease of Doing Business Index is based on the average of 10 sub-indices.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • However, according to some critics, the Ease of Doing Business Index is not sufficiently independent to be fully credible.
  • Some of the research lacks the rigour of a coherent economic theory, contains unstated ideological biases, and too much of it is undertaken by individuals closely associated with the index and reforms.

Doing Business Report

  • The Doing Business Report (DB) is a study elaborated by the World Bank Group since 2003 every year that is aimed to measure the costs to firms of business regulations in 185 countries.
  • The study has become one of the flagship knowledge products of the World Bank Group in the field of private sector development.
  • It is claimed to have motivated the design of several regulatory reforms in developing countries.
  • The study presents every year a detailed analysis of costs, requirements and procedures a specific type of private firm is subject in all countries, and then, creates rankings for every country.
  • It is also considered as a source of knowledge for economies to know about regulatory aspects of their business climate.

Ease of Doing Business and World Economies

  • India stands at 130th position in the recent rankings published by Doing Business and World Bank.
  • India’s rank in the recently released global Doing Business rankings remains marginally changed from the last year rankings.
  • New Zealand tops this year’s ranking, dethroning Singapore.
  • India’s ranking in several areas fell this year. On the ease of starting a business, it slipped to 155th from 151st. On dealing with construction permits, it stumbled to 185th from 184th.
  • However, in the area of protecting minority interests of shareholders, India is ranked at eight, its best ranking across all parameters.

Ease of Doing Business and the Indian States

  • Andhra Pradesh and Telangana were declared joint toppers with a score of 98.78% on 340 parameters in the state rankings dethroning Gujarat.
  • Gujarat (98.21%) which had topped the inaugural rankings last year, slipped to the third slot this time.
  • Other states in top 10 are Chhattisgarh (97.32 per cent), Madhya Pradesh (97.01 per cent), Haryana (96.95 per cent), Jharkhand (96.57 per cent), Rajasthan (96.43 per cent), Uttarakhand (96.13 per cent) and Maharashtra (92.86 per cent).
  • Uttar Pradesh, West Bengal and Bihar were classified as “aspiring leaders” with scores of 70-90%.
  • Himachal, Tamil Nadu and Delhi were identified as states where acceleration is required, given that their score was between 40% and 70%.
  • More efforts are needed to encourage states like Jammu and Kashmir (at 31st) and other north-eastern regions to improve their business climate.
  • Nagaland, Manipur, Mizoram and Sikkim stand at 26th, 28th, 29th and 30th position.
  • 8 of the top 10 states in DIPP’s 340-point Business Reform Action Plan are governed by the BJP-led National Democratic Alliance.
  • The national implementation average stands at 48.93 percent, significantly higher than last year’s national average of 32 percent, according to a DIPP statement.

Conclusion, Future Concerns and Government’s Reforms

  • While last year only 7 states had implemented over 50% of the total reform points and no state had an implementation percentage of over 75%, this year saw 17 States crossing the 50% implementation mark and 16 states have an implementation percentage of over 75%.
  • Prime Minister Modi is keen to ensure that India finds a place in the top 50 countries within a year or two.
  • The reports show that this year 4 of the 7 states with the lowest income levels in India have found a place in the top 10 ranks, while all the 7 such states had an implementation rate of over 75%.
  • There has also been significant progress this year in the area of judicial reforms compared to last year, particularly due to the passage of the Commercial Appellate Divisions Act in 2015 which permits setting up of commercial courts to resolve such disputes.
  • In the areas that India’s performance has improved, the biggest improvement was under the head of ease of ‘access to electricity’, where it moved up 29th spots to 70th.
  • Despite the government’s efforts at financial inclusion and pushing ease of credit delivery, India fell in ‘getting credit’ ranking from 36th to 42nd.
  • The NDA government has announced its plans to resolve insolvency issues and enforcing contracts through legislations such as the bankruptcy law and public contracts dispute resolution bill.
  • In the past year, India eliminated the paid-in minimum capital requirement and streamlined the process for starting a business.
  • Prime Minister Narendra Modi also worked to sweep away arcane rules and simplify procedures but still India remains one of the planet’s toughest places to do business.
  • Getting an electricity connection in the country now has been made vastly easier. India this year ranks 26th on the ease of getting a power connection, up from 51st last year.
  • Indian government has also implemented an electronic system for companies to pay employee insurance contributions, easier procedures for exporting and importing, and new special mechanisms for resolving commercial disputes.
  • India of late has upgraded infrastructure, raised foreign-investment limits and digitised approvals and registrations. The groundwork was also laid this summer for a sales-tax revamp that hasn’t yet been implemented.
  • A major new bankruptcy code was signed into law this year but hasn’t come entirely into effect. On the ease of resolving insolvency, India’s rank fell this year to 136th from 135th.

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