[Answered]Discuss various efforts made by India and various states to improve ease of doing business in India. What else needs to be done?

Demand of the question

Introduction. Contextual Introduction.

Body. Discuss recent efforts to improve in Ease of doing business. What else can be done to improve the rank?

Conclusion. Way forward.

Recent rise in India’s ranking by 14 places to 63 in the World Bank’s Ease of Doing Business 2020 survey is a positive development for India. From being ranked 142 in 2014 to 63 in 2020, it has been a significant upward journey for the country in a rank list that is an important input in the plans of global investors. Many recent initiatives and efforts have been made by both the centre and state government in order to improve India’s ease of doing business.

Recent efforts to improve in Ease of doing business:

  1. Starting a Business: India made starting a business easier by fully integrating multiple application forms into a general incorporation form. India also replaced the value added tax with the GST (Goods and Services Tax) for which the registration process is faster.
  2. Dealing with Construction Permits: India streamlined the process of obtaining a building permit and made it faster and less expensive to obtain a construction permit. It also improved building quality control by introducing decennial liability and insurance.
  3. Getting Credit: India strengthened access to credit by amending its insolvency law. Secured creditors are now given absolute priority over other claims within insolvency proceedings.
  4. Paying Taxes: India made paying taxes easier by replacing many indirect taxes with a single indirect tax, the GST, for the entire country. India also made paying taxes less costly by reducing the corporate income tax rate and the employees’ provident funds scheme rate paid by the employer.
  5. Trading across Borders: 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. Resolving insolvency: India made resolving insolvency easier by promoting reorganisation proceedings in practice. Resolving insolvency has shown a jump of 56 spots, endorsing the successful implementation of the Insolvency and Bankruptcy Code, 2016. India also made resolving insolvency more difficult by not allowing dissenting creditors to receive as much under reorganisation as they would receive in liquidation. This reform applies to both Delhi and Mumbai.
  7. Other reforms: Separately, the government had also announced implementation of eBiz portal which will offer Government-to- business (G2B) services for investors and business activities, through a single window to cut time and cost and improve business environment. Under its National Trade Facilitation Action Plan 2017-2020, India implemented several initiatives that improved the efficiency of cross-border trade, reducing border and documentary compliance time for both exports and imports.

What else can be done to improve the rank?

  1. Creating demand: There is need to focus on generating aggregate demand while focusing on improving ease of doing business. At the present scenario it is unwise to judge the state of economy on basis on the ease of doing business Index. India is facing an aggregate demand slowdown, thereby require fiscal stimulus.
  2. Focusing on Public Capital Formation: The composition of the public spending matters for growth. Increase in the fiscal deficit took the form of rise in public consumption rather than public capital formation, which had temporary effects. The focus needs to shift to the capital formation for increasing aggregate demand and raising the potential supply of the economy.
  3. Attracting investment: India needs to move faster on the reform front, to better attract global savings and investments. The available data suggest that the resources required for starting a business can be considerably higher in the lower income economies.
  4. Entrepreneurship: We need to induce policy measures to boost entrepreneurship nationally. It would lead to better employment opportunities, higher tax revenue for governments, and also give rise to improved personal income as well.
  5. Taxes: We need to, further simply the indirect goods and services tax (GST) regime, and make taxes, both on income and consumption, easy and taxpayer-friendly. The average time for filing taxes can be significantly higher in lower-middle income economies like India.
  6. Construction reforms: India has a high global rank in dealing with construction permits, 27th in the ranking. The way ahead is to have reforms in place to better coagulate funds for built spaces.

India is among the top 10 improvers in 2020 report. However, India still lags in areas such as enforcing contracts (163rd) and registering property (154th). While the improvements are impressive and the rise in overall rankings in the last few years is noteworthy, the fact is that India is still below its competitors for global capital. The country lags in many key metrics. The Centre must convince the States to reform their systems.

Print Friendly and PDF