Ease of Doing Business Index & India (Download PDF)

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Next Week! ! Urban Transportation Policy. 👌 Ease of doing business index created by Simeon Djankov at the World Bank Group. Research done by Oliver Hart (economist) and Andrei Shleifer as “The Regulation of Entry” in 2002.

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Ease of Doing Business Index & India (Current Affairs/GS 2017 - 18) - WW. 48 (In - English)

Dr. Manishika Jain explains Ease of Doing Business & India’s position

Ranking Ranges from 1 to 190

  • For 1st time in 2017: Doing Business collected data for 2 cities in 11 economies with more than 100 million inhabitants in Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, Russian Federation & USA.

📝 What is taken in to Account?

Ranking done on 10 sub-indices:

  • Starting a business: Procedures, time, cost and minimum capital to open a new business

  • Dealing with construction permits: Procedures, time and cost to build a warehouse

  • Getting electricity: Procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse

  • Registering property: Procedures, time and cost to register commercial real estate

  • Getting credit: Strength of legal rights index, depth of credit information index

  • Protecting investors: Indices on the extent of disclosure, extent of director liability and ease of shareholder suits

    👌 Extent of shareholder rights index (0–10) India & Kazakhstan with frontier 10

  • Paying taxes: Number of taxes paid, hours per year spent preparing tax returns and total tax payable as share of gross profit

  • Trading across borders: Number of documents, cost and time necessary to export and import

  • Enforcing contracts: Procedures, time and cost to enforce a debt contract

  • Resolving insolvency: Time, cost and recovery rate (%) under bankruptcy proceeding

Extra Information Derived from Doing Business Data

  • Distance to frontier: 0 indicate lowest & 100 indicates highest performance.

    DB 2018 Distance to Frontier (DTF)

    DB 2018 Distance to Frontier (DTF)

    DB 2018 Distance to Frontier (DTF)

  • Entrepreneurship: Based on data collected directly from 130 company registrars on newly registered firms over the past seven years

  • Good practices: How other governments have improved the regulatory environment in the past

  • Transparency in business regulation: Accessibility of regulatory information- fee schedules for 4 regulatory processes in the largest business city of an economy

👌 What Ease of Doing Business DOES NOT Measure?

  • Macroeconomic conditions, or employment level, corruption, stability or poverty
  • Strengths of the global financial system, financial system of every country, and state of the finances of the government.
  • Regulation like financial market, environment, or intellectual property regulations relevant for the private sector.
  • Complete assessment of competitiveness of a country (kind of proxy for regulatory framework faced by the private sector in a country).
  • All cities in India (in India – only Mumbai - 47% & Delhi – 53 % weightage on distance to frontier scores)
  • Direct or indirect impacts of demonetization and has not yet taken into account GST.

Methodology for Doing Business Ranking

  • Ranking is based on questionnaire responses.

  • Sometimes simpler regulations might not increase ratings- protecting the rights of creditors and investors and establishing or upgrading property and credit registries, may increase regulation.

  • Case study generally is based on domestically owned manufacturing company with no direct relevance to foreign investors and large companies.

  • Simple averaging approach for weighting sub-indicators and calculating rankings.

  • Ranking of economies is determined by sorting aggregate distance to frontier scores, rounded to two decimals.

India’s Stand in Ease of Doing Business Index

India has jumped 30 ranks - one of the best where businesses can come in. The following criteria are used by World Bank for deciding its Ease of Doing Business rankings:

World Bank Recognises India's Reforms

World Bank Recognises India’s Reforms

World Bank Recognises India’s Reforms

India’s Achievement in 2017

  • India stood out this year as one of the 10 economies that improved the most in the areas. The lone country in South Asia and even the BRICS to do that

  • India’s Distance to Frontier score rising by a whopping 4.7 points compared to China’s 0.4 points

  • In South Asia, 20 reforms were implemented by six of the region’s eight economies. India carried out eight reforms, the highest number for the country in a single year.

  • In last several years of the 189 countries - India was hovering around 130 - 140. In 2015, India was 142. Then the next two years the ranks were 131 and 130.

  • 19 more reforms in the pipeline, which are expected to significantly improve the business ecosystem.

  • India’s improving perception in ease of doing business has a huge federal element. Junaid Ahmed, India head of World Bank said, “India’s unique story has a federal spread means not just the centre but states too have created reforms. That’s the real reason behind 30 ranks move up. ”

  • 2017 annual ease of doing business rankings, New Zealand (1st), Singapore (2nd) and Denmark (3rd) followed by Republic of Korea, Hong Kong SAR, China, USA, UK, Norway, Georgia, and Sweden.

Where India Lags?

  • Bhutan (75th place) is South Asia’s highest-ranked economy, followed by India (at 100) and Nepal (at 105).

  • Major slip in ranking in registering property from 138 last year to 154 this year due to increase in time taken, cost and number of procedures for registration.

  • Starting a business, enforcing contracts and dealing with construction permits

  • It takes longer to enforce a contract today, at 1, 445 days, than 15 years ago (1, 420 days).

What Impacted India’s Performance?

Table Contain Shows the Methodology

Table Contain Shows the Methodology

Methodology

Indian Regulations which Had an Impact

Starting a Business

  • Fifteen years ago, it took over 50 days on average to start a business in the region, compared to 17 days now.

  • India’s digital drive

  • Online application system

  • Region specific solutions like merger of pleas for profession tax and value added tax in Mumbai and the merging of applications for PAN and Tax Account Number or TAN.

  • Report says that India made it more difficult by introducing requirement to file a declaration before the commencement of business operations.

  • Streamline business incorporation process by introduction of the SPICe Form (INC-32), which combined the application for the Permanent Account Number or PAN.

Dealing with Construction Permits

  • Reduction in the slew of procedures. Reduction in time taken to obtain a building permit due to the new online system has streamlined the process at Municipality level.

Getting Credit

  • Automatic stay for secured creditors during reorganization procedures

  • Changes in rules on priority of secured creditors outside reorganization proceedings

  • Adopt new insolvency and bankruptcy code.

  • Governments sustained efforts to reduce NPA’s- establishment of debt recovery tribunals reduced non-performing loans by 28 % and lowered interest rates on larger loans, suggesting faster processing of debt recovery cases cut the cost of credit.

Protecting Minority Investors

  • Here India’s improvement is among the best in the world.

  • Slew of reforms introduced by SEBI Protection mechanism for minority investors through creation of increased remedies available in cases of prejudicial transactions.

Paying Taxes

  • Easy to comply with corporate income tax regulations

  • Electronic payments to the Employees Provident Fund

Trading Across Borders

Increased use of mobile and electronic modes and end of merchant overtime fees has reduced time taken to comply with export and import regulations at ports.

Enforcing Contracts

Introduction of National Judicial Data Grid as this has allowed case management reports on local courts to be generated.

Resolving Insolvency

Insolvency And Bankruptcy Code, 2016 introduced a reorganization procedure for corporate debtors and facilitated continuation of the debtor’s business during insolvency proceedings.

Advantages for Good Ranking

  • Doesn’t happen over couple of indicators

  • Consistently moved the bar making quite a difference in the way foreign investors are coming in.

  • Capture completely regulatory framework for small and medium firms

  • Domestic investment will be impacted which ultimately influences growth in terms of jobs, in terms of employment.

Findings

  • Lower barriers to start-up are associated with a smaller informal sector.

  • Lower costs of entry encourage entrepreneurship, enhance firm productivity and reduce corruption.

  • Simple start-up translates into greater employment opportunities.

Focus Areas in News (Week 48 - 2017)!

  • Bamboo exempted from Indian Forest Act, 2017

  • Indian Ocean Naval Symposium

  • 👌 Aditya L1 Mission – India’s satellite observatory for Sun

  • Siang River turns black

  • 📝 Urban transportation – Hyderabad Metro

  • Global Entrepreneurship Summit

  • 15th ASEAN Summit

  • Universal Health Coverage (Karnataka Govt. ) – Hindu Editorial

  • Public Finance Management Systems

  • Mission 41K & Open Access – Railway Electricity

  • Bharatmala Pariyojana & Logistics Performance Index

  • BIS Act, 2016

  • SANKALP (train the trainers) & STRIVE (formalize vocational training) – Skill India

  • Indian Income Tax Panel led by Arbind Modi

  • PM Mahila Shakti Kendra

  • 15th Finance Commission

  • 📝 Models for PPP – HAM, BOT, EPC

  • UN Program – GEF -6 Fund - District Energy & Markets for Energy Efficiency 📹

  • Mt. Agung – Bali, Indonesia - VONA 📹

Forthcoming Lectures

  • International Court of Justice

  • Blue Economy vs. Ocean Economy

  • Urban Waste Management

  • Insolvency & Bankruptcy Code

  • NDMA Guidelines

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Ease of Doing Business Index & India (Current Affairs/GS 2017 - 18) - WW. 48 (In - Hindi)

Dr. Manishika Jain explains Ease of Doing Business & India’s position

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- Published/Last Modified on: December 5, 2017

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