World Bank’s Ease Of Doing Business Index: Where India Gained And Lost

India saw its ranking in the World Bank’s ‘Ease of Doing Business’ index rise 14 spots in the latest survey, released on Wednesday in Washington.

India’s rank in the global regulation index jumped to 63 for 2018-19 from 77 in the previous year. The improved ranking, the World Bank said, followed reforms implemented by India in the areas of starting a business, dealing with construction permits, paying taxes and resolving insolvency. Given the size of India’s economy, these reform efforts are particularly commendable, the study said.

India continued to rank among the 10 economies which saw the most significant improvement in indicators tracked as part of the ‘Ease of Doing Business’ index. As in other economies on the list of 10 ‘Top Improvers’, the World Bank noted that Indian leaders approached ease of doing business as a core component of their reform strategies.

India: Areas Of Strength

Resolving Insolvency

Among the areas where India gained the most was in resolving insolvency. India’s rank here moved from 108 to 52.

“India made resolving insolvency easier by promoting reorganization proceedings in practice. India also made resolving insolvency more difficult by not allowing dissenting creditors to receive as much under reorganization as they would receive in liquidation,” the study said.

The Insolvency and Bankruptcy Code was passed in 2016 in India. Since then, its performance has been marred by delays in resolution. As of June 2019, out of 1,143 cases where insolvency proceedings are still on-going, 362 cases have exceeded the 270-day deadline, showed data put out by the Insolvency and Bankruptcy Board of India.

Dealing With Construction Permits

India also saw its ranking rise from 52 to 27 in the category of dealing with construction permits. Both across Delhi and Mumbai, where the survey is conducted, improvement was noted.

Delhi streamlined the process, reduced the time and cost of obtaining construction permits, and improved building quality control by strengthening professional certification requirements, the report said. Across Mumbai, the process of obtaining a building permit was faster and less expensive, it added.

Trading Across Borders

India’s rank jumped 12 places in the category of trading across borders.

“India made trading across borders easier by enabling post-clearance audits, integrating trade stakeholders in a single electronic platform, upgrading port infrastructures, and enhancing the electronic submission of documents. This reform applies to both Delhi and Mumbai,” the report said.

India: Areas Of Weakness

Starting A Business

India’s rank in starting a business remained poor at 136 out of the 190 economies. It gained just one rank in the past year.

The small one gain on this front followed the government’s decision to abolish filing fees for the electronic Simplified Proforma for Incorporating a Company, memorandum of association, and articles of association, the report said.

Enforcing Contracts

Across key parameters, India’s weakest spot remains enforcing contracts. Here India ranks at 163. It’s rank remained unchanged. The report did not comment specifically on India’s track record in this area but said that it takes into account the “time and cost to resolve a commercial dispute and the quality of judicial processes” while judging ranking.

Protection Of Minority Investors

While India ranks relatively high in ‘protection of minority investors’, it saw its rank slip in the latest survey. The country’s rank slipped from 7 to 13 even though its score remained unchanged.

Gains Over The Years

The World Bank study stated that India has made a substantial leap upward, raising its ease of doing business ranking from 130 in 2016 to 63 in the 2020 survey .

Over this period, India’s rank in dealing with construction permits has seen the sharpest rise from 183 in 2016 to 27 in 2020. India made obtaining a building permit faster by implementing an online ‘Single Window System’ for the approval of building plans, according to the study in 2018.

The country’s standing in the areas of insolvency resolution and getting electricity have also moved substantially. In contrast, India continues to struggle with enforcing contracts and starting a business.